management approaches - henry county school...

LESSON 2 | Management Approaches 37

L E S S O N

22ManagementApproachesManagementApproaches

The Human Resources ApproachManagers get things done by working with people. That’swhy so many thinkers focus on an organization’s people—its human resources. Many people in the nineteenth andearly twentieth century saw the importance of the humanfactor to an organization’s success. Five important earlyadvocates of the human resources approach to managementwere Robert Owen, Hugo Munsterberg, Mary Parker Follett,Chester Barnard, and Elton Mayo.

Robert Owen’s Claim to Fame

Robert Owen was a successful Scottish businessman. He wasonly 18 when he bought his first factory, in 1789. But in theearly years of the Industrial Revolution, working conditionswere very harsh. Owen saw things that repulsed him. He sawsmall children working in factories. Workdays often lasted 13 hours. Factory owners paid big money for the best machines.But they were unwilling to pay employees a living wage.

Owen chided business owners for treating their machinesbetter than their people. He argued that spending money toimprove labor conditions was one of the best investments abusinessman could make. Concern for employees was highlyprofitable for management, he maintained. And it wouldrelieve human misery.

Owen’s vision was impossibly idealistic. People rememberhim not so much for his successes as for his courage and hiscommitment to reducing workers’ suffering.

Contributions of Hugo Munsterberg

Hugo Munsterberg was the founder of industrial psychology.That’s the scientific study of individuals to help them do moreand fit in better at work. In his book Psychology and IndustrialEfficiency (1913), he argued for the study of human behavior tospot both general patterns and individual differences.

• the human resourcesapproach

• the quantitativeapproach

• managementapproaches today

Learn About . . . B

Do you have an optimisticor pessimistic view ofhuman nature? How doesthis view affect yourthinking aboutorganizations?

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Munsterberg called for psychological tests to better match peoplewith jobs. He thought that scientific theories about learningwould help develop training programs. He also wanted to find outhow best to motivate workers.

Munsterberg saw a connection between his own work and that ofscientific management experts like Taylor and the Gilbreths. Bothstrove for more efficiency through scientific analysis of work.They also wanted to see better alignment of people’s skills andthe jobs to be filled. Much of what people know today aboutchoosing employees, training them, designing their jobs, andmotivating them to do the work is built on Munsterberg’s ideas.

Contributions of Mary Parker Follett

Mary Parker Follett was one of thefirst to consider organizations interms of individual and groupbehavior. She lived and wrote aboutthe same time as Taylor, the Gilbreths, and Gantt. But her ideas

were more people oriented. She was a philosopher, and herideas had implications for management practice.

Individuals could best reach their full potential in groups,she believed. The manager’s job was to coordinate groupefforts. She stressed the manager’s “power with” employees,rather than “power over” them.

Managers should be part of the group, Follett believed. Theyshould lead with their expertise and knowledge—not justtheir position as boss. Her ideas about motivation, leadership,power, and authority remain current today.

Chester Barnard’s Contributions

Chester Barnard, like Follett, came between the scientificmanagement experts and the human resources experts. LikeFayol, Barnard wasn’t just a theorist. He was a managerhimself as the president of the New Jersey Bell Telephone Company.

He was familiar with Max Weber’s “ideal bureaucracy.” But Barnard saw organizationsdifferently. Weber favored an “impersonal” organization. Barnard, on the other hand,saw organizations as social systems that needed human cooperation to work. He wroteabout his ideas in The Functions of the Executive (1938).

A company, in Barnard’s view, was a set of people with interacting social relationships.The manager’s job was to communicate and to get them to put out top effort. An

CHAPTER 2 | The Historical Roots of Contemporary Management Practice38

• Hawthorne studies• hierarchy• optimization• integrative

frameworks• process approach• systems approach• closed system• open system• stakeholders• contingency

approach

VocabularyB

Mary Parker Follett focusedon individual and groupbehavior. She believed thatindividuals would reach theirfull potential only in groups.Courtesy of B>Quest, RichardsCollege of Business, University ofWest Georgia

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organization’s success, as Barnard saw it, depended on employees’ cooperation and“acceptance of authority.”

Barnard also saw the importance of a company’s outside stakeholders. He realized thata successful business has to win and keep the support of investors, suppliers,customers, and others. He thought managers should pay attention to what’s going onin the world outside the company. For instance, in this way they can fine-tune thecompany as needed to make sure its supply chain is intact and its products relevant.Barnard saw that even with superb internal management, a company could still fail ifit couldn’t find new markets or ensure its supply of raw materials.

Barnard’s influence continues today. Many businesses try to set up cooperative workgroups. Social responsibility is another hot topic in the business world. For instance,employees and outsiders such as shareholder activists both want to see corporationsadopt green technologies and build more-diverse workforces.

And careful study of external factors—energy costs, labor markets, technology—isstandard practice for most firms today. Each of these developments has origins in thework of Chester Barnard and Mary Parker Follett.

The Hawthorne Studies

No contribution to the human resources approach to management in the earlytwentieth century had more impact than the Hawthorne studies. These were a series ofstudies during the 1920s and ‘30s that provided new insights into group norms and behaviors.At the beginning, industrial engineers at the Western Electric Company’s HawthorneWorks in Cicero, Illinois, tried to see how lighting affected worker productivity.

Employees assigned to an experimental group worked under light that varied inintensity. Those in a control group worked under constant light.

The engineers expected individual workers to be more productive under brighter light.But they found that as they increased the light for the experimental group, outputfrom both groups rose. When they dropped the light level in the experimental group,productivity in both groups continued to rise. They had to drop the experimentalgroup’s lighting to the level of moonlight before these workers’ output dropped.

The engineers weren’t sure just what to make of this. But at least they figured thatintensity of light wasn’t directly related to group productivity.

In 1927 the engineers asked Harvard Professor Elton Mayo and his associates to jointhe study as consultants. Mayo worked with Western Electric through 1932. His team’sexperiments covered such things as job redesign. They also changed the length of theworkday and workweek. Other studies looked at the value of rest periods and theeffects of a piecework incentive pay system. The pay study produced an interestingfinding: Peer pressure from colleagues to hold to certain standards turned out to makea difference in workers’ productivity. Workers were also more productive when theyfelt security and acceptance from the group.


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The Hawthorne studies under Elton Mayo’s leadership had a big impact on the field of management. Mayo concluded that behavior is closely tied to feelings. He alsofound that:

• group influences affect people’s behavior

• group standards determine individual output

• money matters less to workers than security and acceptance by a group.

All these points together are known as the Hawthorne Effect.

The Mayo group’s findings brought renewed attention to human factors. They also ledto increased managerial paternalism—a tendency to treat workers like children to beprovided for.

The Hawthorne studies had their critics. But they helped business owners get awayfrom the idea that workers were just like machines.

The Human Relations Movement and Management History

The human relations movement was a smaller group within the human resourcesapproach to management. The leaders of this movement were committed to morehumane management. Employee satisfaction was the main thing, they felt: A satisfiedworker would be a productive worker.

The three people leading this approach—Dale Carnegie, Abraham Maslow, andDouglas McGregor—held views rooted more in their personal philosophies than inobjective research.

Management historians often overlook Dale Carnegie. But he has had enormousinfluence. After all, he literally “wrote the book” on How to Win Friends and InfluencePeople. During the 1930s, ‘40s, and ‘50s, millions of people read this book. Andthousands of people attended his lectures and seminars during that period as well.

Carnegie’s system boiled down to a few simple points:

• Make others feel important by sincerely appreciating their efforts

• Make a good first impression

• Win people over to your way of thinking by letting them do the talking, beingsympathetic, and “never telling a man that he is wrong”

• Change people by praising their good traits and letting offenders save face.

Abraham Maslow, a psychologist, proposed a hierarchy of needs: physiological, safety,social, esteem, and self-actualization. (A hierarchy is a series of graded or ranked personsor elements.) He thought a person must satisfy each need before advancing to the nextlevel. Someone worried about safety, for instance, can’t focus on social needs. And onthe other hand, once a need has been met, it no longer serves to motivate a person.Once a person’s need for esteem is met, the prospect of more esteem won’t motivatehim or her.


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Maslow’s idea of a needs hierarchy may be the best-known theory of generalmotivation today. Books on such topics as management, organizational behavior, andmarketing refer to it often. It’s not a concept supported by research, however.

Douglas McGregor is best known for positing two ideas about human nature. He calledthem Theory X and Theory Y.

Theory X was a negative view. It assumes people have little ambition, dislike work,shun responsibility, and need close supervision to get anything done. Theory Y, on theother hand, assumes human beings like to work. It also assumes people can acceptresponsibility and direct themselves. McGregor himself believed in Theory Y. Hethought this sunnier view should guide managers.

McGregor preached this gospel for a dozen years at the Massachusetts Institute ofTechnology (MIT). He then went off to Antioch College to serve as its president for six years.

At the end of his time there, however, McGregor had doubts about how effective hisideas were. “I believed,” he wrote, “that a leader could operate successfully as a kind ofadvisor to his organization. I thought I could avoid being a ‘boss.’ ...I finally began torealize that a leader cannot avoid the exercise of authority any more than he canavoid responsibility for what happens to his organization.”

Ironically, he returned to MIT to preach his original ideas again. He kept on until hedied. His beliefs, like Maslow’s, have influenced management theorists andpractitioners more than the objective research behind them would justify.

McGregor, Maslow, and Carnegie were all bullish onhuman nature. They were unshakably optimistic aboutwhat people could and would achieve—despite all theevidence of human failure. And their views have beeninfluential in their field.

The Behavioral Science Theorists

The final group of human resources thinkers was thebehavioral science theorists. They used the scientificmethod to study organizational behavior. Theyconducted objective research and tried to keep theirpersonal beliefs out of their work. Attempting to builda real science of organizational behavior, they tried todo research others could duplicate.

The Application of the Human ResourcesApproach Today

The human resources approach to the study ofmanagement is alive and well today. Or maybe“approaches” would be a better word. There really arehundreds of different approaches. Since World War II,


Dale Carnegie was the author of How toWin Friends and Influence People, one ofthe twentieth century’s most influentialmanagement books. Carnegie’s ideas arestill popular today.AP Wide World Photos

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researchers have generated a wealth of studies that fairly accurately predict behavior inorganizations. Scholars from the human resources school of thought have made greatcontributions. Their work affects the current understanding of issues such asleadership, motivation, job design, organizational culture, and performance appraisal.

The Quantitative ApproachThe quantitative approach to management is “management by the numbers.” It beganduring World War II with efforts to find mathematical and statistical solutions tomilitary problems. The British had to get the most out of their limited air poweragainst the Germans’ massive forces. And so they asked their mathematicians to helpthem figure out where to send their pilots.

Similarly, the US antisubmarine warfare team used these quantitative approaches(sometimes called operations research or OR) to improve the odds for Allied convoyscrossing the North Atlantic. They also used them to select the best depth-chargepatterns for attacking German U-boats.

After the war, businesses began to use these number-crunching techniques on theirown problems. A group of military officers known as the “Whiz Kids” joined FordMotor Company. They began using statistical methods to improve decision makingthere. Two of the most famous were Robert McNamara and Charles “Tex” Thornton.

McNamara became president of Ford and later US Secretary of Defense. In the latterpost, he used cost-benefit analyses to decide how to allocate military resources. Heended up as head of the World Bank.

Tex Thornton’s civilian career included founding Litton Industries, a billion-dollarconglomerate. While running Litton, he used OR techniques to decide whichcompanies to buy.

Dozens of other military operations researchers later went into business as consultantsin the civilian economy. And by the 1950s, many firms had established their own ORgroups.

You may be wondering, what are quantitative techniques anyway? What do they letmanagers do? The quantitative approach includes such things as:

• Computer simulations: What will the company’s payroll look like in 10 years if itgives everyone a 10 percent raise every year?

• Optimization models: What’s the best price the company can charge for its newproduct, to maximize profit but not scare away potential customers?(Optimization means to make a system or design as effective as possible.)

• Critical-path analysis: How long will it really take to get the new product tomarket, with separate teams working on different parts of the project all at thesame time?

Techniques such as these are now standard practice in management, especially inmaking planning and control decisions.


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The quantitative approach to management began in World War II. For instance, USwarfare teams figured the odds of a ship’s making it safely across the North Atlantic.Corbis/Bettmann

Analysis: How Social Events Shape Management Approaches

Management approaches change in response to changes in society.What goes on in the larger society affects what management theoristswrite and what managers focus on. Each of the management theoriesyou’ve studied so far was a product of its times.

What Stimulated the Classical Approach

Efficiency was the common goal of Taylor, the Gilbreths, Fayol, andWeber. The Industrial Revolution had taken place.Workers no longer dideverything by hand; they had machines. But their work wasn’t veryefficient. It was poorly planned, or not planned at all. People weren’tsure what they were actually supposed to do. If a shop even hadsomeone called a manager, he often wasn’t sure what he was supposedto be doing, either. Such chaos created a crying need for ideas toimprove productivity.

This shop-floor chaos was reflected in the economy at large. In the earlytwentieth century, the standard of living was low. Wages were modest.

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Few workers owned their own homes. Production was highly laborintensive. Factories were filled with armies of people doing the samerepetitive tasks day in, day out. Under such circumstances, FrederickTaylor could justify taking months to study a single job and develop astandard “one best way” to do it.

This led to gains in efficiencies that could be passed along in lowerprices. That expanded markets and created more jobs. It helped workingfamilies afford products like stoves and refrigerators.

Likewise, Frank Gilbreth’s work to improve the efficiency of bricklayersled to lower costs for putting up buildings. This, in turn, meant that morebuildings were built and that they cost less to buy. And that, in turn,meant more people could afford to buy a house.

The bottom line in all this? Scientific management raised the entirecountry’s standard of living.

What Stimulated the Human Resources Approach

The human resources approach came into its own in the 1930s. It grewout of two related factors: a backlash against the classicists’view ofworkers as machines, and the Great Depression.

As you have just read, efficiency on the shop floor could raise a country’sstandard of living. But a point comes where enough is enough. A worker isnot a machine. The classical approach, though, saw all problems asengineering problems. If the employee wasn’t producing enough, he orshe needed to be “adjusted” by an incentive pay plan or a job redesign.

The human resources approach was a welcome alternative to thisthinking, especially during the tough times of the Depression. Followersof this approach treated people like people, not machines. But it stilloffered managers ways to increase productivity.

What Stimulated the Quantitative Approaches

The force behind the quantitative approaches was World War II. Duringthe war, the federal government funded efforts to develop mathematicaland statistical tools to apply to military problems. The tools that cameout of these efforts scored some impressive successes. No wonder theysoon found applications in civilian life.

Knowledge of these quantitative techniques spread throughout theeconomy. In the early 1950s, for instance, the Institute of ManagementScience began publishing its journal, Management Science. TheOperations Research Society launched its journal, Operations Research.And by the late 1960s, mathematics, statistics, and operationsmanagement were required courses at most business schools.

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Management Approaches TodayIn the previous lesson you read about the classical approach to management. In thislesson, you have read about the human resources and quantitative approaches. Eachdeveloped at a different point in history. Each developed in response to the socialclimate of its time. And each developed separately from the others. Consider DaleCarnegie, for instance, with his ideas about making a good first impression and lettingothers save face. He was a world apart from Robert McNamara’s quantitative analysesat Ford Motor Company.

But more recently, theorists have come up with three integrative frameworks—toolsfor organizing and understanding management ideas. The three are the process, systems,and contingency approaches.

The Process Approach

In the early 1960s, Harold Koontz looked at the business world around him and called it a “management-theory jungle.” He published an article in December 1961 thatconcluded many of the theories had something to offer. But many others weren’t reallycomplete systems. They were just managerial tools. He felt what was needed was amanagement approach that pulled everything together. And he thought the processapproach might be that something. In this, he was building on the work of Henri Fayol.

The process approach considers the performance of planning, organizing, leading, andcontrolling as circular and continuous. The cycle gets repeated again and again, in otherwords.

Although Koontz’s article sparked considerable debate, most people in the field—scholars and managers—stuck with their own ideas. Still, Koontz had made a mark.Look at a current management book today and you’ll see the influence of the processapproach. It remains a viable framework.

How a Systems Approach Can Integrate Management Concepts

Starting in the mid-1960s, managers began to think about organizations as systems.The systems approach defines a system as a set of related and interdependent partsarranged in a manner that produces a unified whole. A society is a system, for instance. Sois your body. Your computer and your car are both systems, too.

The two basic types of systems are closed and open. Closed systems are those that arenot influenced by or do not interact with their environment. An open system is one thatinteracts with its environment. (See Figure 2.1.)

Today people take for granted the idea that a system interacts with its environment.For instance, advertising in magazines and on the Internet (the media environment)will affect fashions at your school (the system). So when people speak of organizationsas systems, they mean open systems.


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So an organization, with itsmanagement, is a system thatinteracts with and depends onits environment. Inmanagement terms, thismeans dealing with anorganization’s stakeholders.Stakeholders are any groupaffected by the organization’sdecisions and policies.

Government agencies can bestakeholders, for instance. Socan labor unions, competingcompanies, employees, andsuppliers. Customers andclients, local communityleaders, and public interestgroups can be stakeholders,too.

The manager’s job is tocoordinate all these parts toachieve the organization’s goals.Most people within anorganization appreciate the importance of the customer as a stakeholder. If thecompany’s products don’t please the customer, it may suffer from less revenue, afalling stock price, and a shrinking labor force. Failure to meet customer needs can killa company.

The systems approach encourages managers to pay attention to customers and others.They consider stockholders, the press, government regulators, and community leaders,as well. Stockholders need assurance of the company’s soundness. Bad reviews can killa product. Regulators may be planning new environmental standards. Citizenopposition may block the company’s plant expansion. Management has to engage allthese stakeholders.

In the global economy, “environment” has a broader meaning than ever. It includesbroad labor-market trends: for example, Asian workers getting more education andcompeting against Americans. The environment includes new technologies, as well aschanges in energy and oil prices. It includes political developments such as a new free-trade agreement or a civil war. The management of an organization must payattention to all of this.

The systems approach doesn’t tell a manager just what to do. But it provides a broaderpicture than the process approach does. And managers who see their job as linkingtheir organization to its environment help make the organization more responsive toits stakeholders.


PublicPressureGroups Suppliers

Customers

Competitors

Government

LaborUnions

Global

Political

Social

E

cono

mic

TheOrganization

Technological

FI G U R E 2.1

The Organization and Its Environment

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A Contingency Approach to the Study of Management

The contingency approach replaces simpler principles of management and integrates muchof management theory. A contingency, in the everyday sense of the word, is a possibility.It’s something that might happen—depending on something else. It probably won’thappen, but you should probably prepare for it. A thundershower is a contingencyyou prepare for by keeping an umbrella in your backpack, for instance.

In management theory, contingency means something like “variable.” Managers haveto pay attention to the size of an organization as a contingency variable, for instance.They must manage bigger companies differently from smaller ones. Bigger companiesneed more formal personnel procedures, for example. They may need to provideemployee benefits that smaller companies don’t have to offer. Smaller companies, onthe other hand, may have to demand that each employee fill a number of roles.


The case of Andrew Fastow is a reminder of how an opensystem of management works. Fastow, shown here on hisway into court in Houston, was an executive at the failedenergy firm Enron. He pleaded guilty to conspiracy tocommit fraud and went to prison. The failings of high-profile executives like him helped renew public interest inmanagerial ethics. This interest has led, in turn, to newaccounting laws for public companies.AP Wide World Photos

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For more examples of contingency variables, see Figure 2.2. The four in the chart areonly four out of at least 100 that could be listed. But they will give you an idea whatthe term contingency variables means.

Has this ever happened to you? You try to get an answer from someone to a toughquestion, and the response is, “It all depends.” And then you have to ask, “Dependson what?” The contingency approach to management tries to determine that“what”—it tries to spot the factors that really matter to a company’s success.


FI G U R E 2.2

Four Popular Contingency Variables

Organization Size. The number of people in an organization is a major influence on what man-agers do. As size increases, so do the problems of coordination. For instance, the type of organiza-tion structure appropriate for an organization of 50,000 employees is likely to be inefficient for anorganization of 50 employees.Routineness of Task Technology. In order for an organization to achieve its purpose, it uses tech-nology; that is, it engages in the process of transforming inputs into outputs. Routine technologiesrequire organizational structures, leadership styles, and control systems that differ from thoserequired by customized or nonroutine technologies.Environmental Uncertainty. The degree of uncertainty caused by political, technological, sociocul-tural, and economic changes influences the management process. What works best in a stableand predictable environment may be totally inappropriate in a rapidly changing and unpredictableenvironment.Individual Differences. Individuals differ in terms of their desire for growth, autonomy, tolerancefor ambiguity, and expectations. These and other individual differences are particularly importantwhen managers select motivational techniques, leadership styles, and job designs.

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LLeessssoonn 22 RReevviieeww Using complete sentences, answer the following questions on a sheet of paper.

1. What was Robert Owen’s claim to fame as a manager?

2. What was Hugo Munsterberg’s contribution to the field ofmanagement?

3. What are the five needs in Abraham Maslow’s hierarchy?

4. What findings were known as the Hawthorne Effect?

5. What major world event spurred development of quantitativeapproaches to management?

6. Why did it make sense for Frederick Taylor to spend six monthsstudying the “one best way” to do a particular job?

Applying Your Learning

7. Does it matter that the work of theorists like Carnegie, Maslow, andMcGregor has little basis in objective research? Why or why not?

CHECKPOINTS

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