Theories of ManagementTheories of Management

The Evolution of ManagementThe Evolution of Management

What You’ll LearnWhat You’ll Learn

How the Industrial Revolution created a How the Industrial Revolution created a new need for management.new need for management.

How the captains of industry of the last How the captains of industry of the last century created huge empires.century created huge empires.

The principles of Scientific Management.The principles of Scientific Management. The results of the Hawthorne studies on The results of the Hawthorne studies on

worker productivity.worker productivity. Maslow’s Hierarchy of NeedsMaslow’s Hierarchy of Needs

What You’ll Learn cont’dWhat You’ll Learn cont’d The difference between Theory X, Y, and ZThe difference between Theory X, Y, and Z What TQM stands for and Deming’s 14 ptsWhat TQM stands for and Deming’s 14 pts Centralization and DecentralizationCentralization and Decentralization Japanese management concepts and Japanese management concepts and

American management practicesAmerican management practices

Becoming familiar with modern management Becoming familiar with modern management principles will help you understand how principles will help you understand how businesses function in today’s environment.businesses function in today’s environment.

The Industrial RevolutionThe Industrial Revolution

Refers to the period during which a country Refers to the period during which a country develops an industrial economy. In Europe the develops an industrial economy. In Europe the Industrial Revolution began in the eighteenth Industrial Revolution began in the eighteenth century; in the United States, it began around century; in the United States, it began around 1860, just before the Civil War.1860, just before the Civil War.

Before the Industrial Revolution, the US economy Before the Industrial Revolution, the US economy was based on agriculture. Most people worked on was based on agriculture. Most people worked on small farms, using only simple technology, such small farms, using only simple technology, such as horse-drawn plows. Professional managers as horse-drawn plows. Professional managers were not needed because most people worked for were not needed because most people worked for themselves.themselves.

Captains of IndustryCaptains of Industry Toward the end of the nineteenth century, Toward the end of the nineteenth century,

powerful business people who created enormous powerful business people who created enormous business empires dominated and shaped the US business empires dominated and shaped the US economy. These captains of industry included economy. These captains of industry included John D. Rockefeller (oil), JP Morgan (banking), John D. Rockefeller (oil), JP Morgan (banking), Andrew Carnegie (steel) and Cornelius Vanderbilt Andrew Carnegie (steel) and Cornelius Vanderbilt (steamships and railroads).(steamships and railroads).

During this period entrepreneurs founded During this period entrepreneurs founded companies that later became industrial giants. companies that later became industrial giants. One of these companies was Bethlehem Steel. In One of these companies was Bethlehem Steel. In 1863, the company began producing the first iron 1863, the company began producing the first iron railroad rails; by 1899, it was selling almost $1 railroad rails; by 1899, it was selling almost $1 trillion worth of iron and steel products in a year.trillion worth of iron and steel products in a year.

Management HistoryManagement History

By the late 1800s, the US economy depended By the late 1800s, the US economy depended largely on industries such as oil, steel, railroads, largely on industries such as oil, steel, railroads, and manufactured goods. and manufactured goods.

Many people left their farms to take jobs in Many people left their farms to take jobs in factories, where professional managers supervised factories, where professional managers supervised their work.their work.

The new industrial enterprises that emerged in the The new industrial enterprises that emerged in the nineteenth century demanded management skills nineteenth century demanded management skills that had not been necessary earlier.that had not been necessary earlier.

Scientific ManagementScientific Management

Frederick Winslow Taylor—(1856-1915) was the Frederick Winslow Taylor—(1856-1915) was the father of Scientific Management. When he was father of Scientific Management. When he was working as an apprentice at the Midvale steel working as an apprentice at the Midvale steel company, he noticed that most workers did not company, he noticed that most workers did not work as hard as they could. To increase work as hard as they could. To increase efficiency, Taylor tried to figure out the “one efficiency, Taylor tried to figure out the “one best way” to perform a particular task. To do so, best way” to perform a particular task. To do so, he used a stop watch to determine which method he used a stop watch to determine which method was the most efficient. These studies were was the most efficient. These studies were known as “Time and Motion Studies.”known as “Time and Motion Studies.”

Taylor’s scientific management was Taylor’s scientific management was based on four main ideas: based on four main ideas:

1.1. Jobs should be designed according to Jobs should be designed according to scientific rules rather than rule-of-thumb scientific rules rather than rule-of-thumb methods. Employers should gather, methods. Employers should gather, classify, and tabulate data in order to classify, and tabulate data in order to determine the “one best way” of determine the “one best way” of performing a task or series of tasks.performing a task or series of tasks.

2. Employees should be selected and trained 2. Employees should be selected and trained according to scientific methods. Employers according to scientific methods. Employers should also train employees in order to should also train employees in order to improve their performance.improve their performance.

3. The principles of scientific management 3. The principles of scientific management should be explained to workers.should be explained to workers.

4. Management and workers should be 4. Management and workers should be interdependent so that they cooperate.interdependent so that they cooperate.

Abraham H. MaslowAbraham H. Maslow1908-19701908-1970

Maslow was a psychologist who developed a theory Maslow was a psychologist who developed a theory of motivation. His ideas had a significant impact of motivation. His ideas had a significant impact on management. Maslow believed that on management. Maslow believed that individuals fulfill lower-level needs before individuals fulfill lower-level needs before seeking to fulfill higher-level needs. That is, seeking to fulfill higher-level needs. That is, people satisfy their need for food before they seek people satisfy their need for food before they seek self-fulfillment. Because one set of needs must be self-fulfillment. Because one set of needs must be met before another is sought, Maslow referred to met before another is sought, Maslow referred to this as a hierarchy of needs.this as a hierarchy of needs.

Maslow’s TheoryMaslow’s Theory

Applying Maslow’s Theory to Applying Maslow’s Theory to ManagementManagement

At the lowest level, workers are motivated by basic needs, At the lowest level, workers are motivated by basic needs, such as the needs for wages or salary. such as the needs for wages or salary. Basic needsBasic needs also also include the physical conditions in which a person works, include the physical conditions in which a person works, such as heating, lighting, and noise.such as heating, lighting, and noise.

Once these basic needs are met, employers can address the Once these basic needs are met, employers can address the next level of needs—next level of needs—safety or security needssafety or security needs. Some of . Some of these security needs can be met by providing employees these security needs can be met by providing employees with insurance, retirement benefits, and job security. with insurance, retirement benefits, and job security. Employees need to know that in the workplace, they are Employees need to know that in the workplace, they are safe from physical, psychological, or financial harm.safe from physical, psychological, or financial harm.

Managers meet workers’ Managers meet workers’ social needssocial needs by providing by providing work environments in which colleagues interact work environments in which colleagues interact by providing opportunities for co-workers to by providing opportunities for co-workers to socialize with one another by providing lunch socialize with one another by providing lunch rooms or allowing employees to attend company rooms or allowing employees to attend company retreats.retreats.

Status needsStatus needs can be met by providing employees can be met by providing employees with signs of recognition that are visible to others, with signs of recognition that are visible to others, such as job titles, awards, designated parking such as job titles, awards, designated parking spaces, and promotions.spaces, and promotions.

Managers can meet employees’ need for Managers can meet employees’ need for self-self-fulfillmentfulfillment by providing them with opportunities by providing them with opportunities to be creative at work or allow them to become to be creative at work or allow them to become involved in decision making.involved in decision making.

Theory XTheory X

MIT Professor Douglas McGregorMIT Professor Douglas McGregor

Theory X—assumes that people are basically Theory X—assumes that people are basically lazy and will avoid working if they can. To lazy and will avoid working if they can. To make sure that employees work, Theory X make sure that employees work, Theory X managers impose strict rules and make sure managers impose strict rules and make sure that all important decisions are made only that all important decisions are made only by them.by them.

Theory YTheory Y

Theory Y assumes that people find Theory Y assumes that people find satisfaction in their work. Theory Y satisfaction in their work. Theory Y managers believe that people are creative managers believe that people are creative and will come up with good ideas if and will come up with good ideas if encouraged to do so. They tend to give encouraged to do so. They tend to give their employees much more freedom and let their employees much more freedom and let them make mistakes.them make mistakes.

Theory ZTheory Z

William Ouchi, a management researcher William Ouchi, a management researcher developed this new theory of management developed this new theory of management in the 1980sin the 1980sTheory Z is a business management theory Theory Z is a business management theory that integrates Japanese and American that integrates Japanese and American business practices. The Japanese business business practices. The Japanese business emphasis is on collective decision making, emphasis is on collective decision making, whereas the American emphasis is on whereas the American emphasis is on individual responsibility.individual responsibility.

Japanese Type OrganizationJapanese Type Organization

1.1. Lifetime employmentLifetime employment2.2. Collective decision makingCollective decision making3.3. Collective responsibilityCollective responsibility4.4. Slow evaluation and promotionSlow evaluation and promotion5.5. Implicit (understood, implied) control Implicit (understood, implied) control

mechanismsmechanisms6.6. Non-specialized career pathNon-specialized career path7.7. Holistic concern for employee as a personHolistic concern for employee as a person

American Type OrganizationAmerican Type Organization

1.1. Short-term employmentShort-term employment

2.2. Individual decision –makingIndividual decision –making

3.3. Individual responsibilityIndividual responsibility

4.4. Rapid evaluation and promotionRapid evaluation and promotion

5.5. Explicit (clear, precise, unambiguous) control Explicit (clear, precise, unambiguous) control mechanismsmechanisms

6.6. Specialized career pathSpecialized career path

7.7. Segmented concern for employee as an Segmented concern for employee as an employee.employee.

Theory Z Type OrganizationTheory Z Type Organization

1.1. Long-term employmentLong-term employment2.2. Consentual, participative decision-makingConsentual, participative decision-making3.3. Individual responsibilityIndividual responsibility4.4. Slow evaluation and promotionSlow evaluation and promotion5.5. Implicit, informal control with explicit, Implicit, informal control with explicit,

formalized measuresformalized measures6.6. Moderately specialized career pathModerately specialized career path7.7. Holistic concern, including familyHolistic concern, including family

The Hawthorne EffectThe Hawthorne Effect

The result of an experiment conducted at the The result of an experiment conducted at the Hawthorne plant of Western Electric in Cicero, Hawthorne plant of Western Electric in Cicero, Illinois in 1924. They lowered the lighting in the Illinois in 1924. They lowered the lighting in the factory, expecting productivity to fall; but instead, factory, expecting productivity to fall; but instead, to their astonishment, productivity increased.to their astonishment, productivity increased.

The researchers concluded that productivity rose The researchers concluded that productivity rose because workers worked harder when they because workers worked harder when they received attention. This phenomenon, in which received attention. This phenomenon, in which change of any kind increases productivity, has change of any kind increases productivity, has been known as the “Hawthorne Effect.”been known as the “Hawthorne Effect.”

TQM—Total Quality TQM—Total Quality ManagementManagement

Result of study conducted in the 1950s by W. Result of study conducted in the 1950s by W. Edwards Deming who began studying how Edwards Deming who began studying how companies ensure that the products they produce companies ensure that the products they produce are not defective. He came up with a are not defective. He came up with a mathematically based approach to quality control mathematically based approach to quality control that became known as Total Quality Management, that became known as Total Quality Management, which is a system of management based on which is a system of management based on involving all employees in a constant process of involving all employees in a constant process of improving quality and productivity by improving improving quality and productivity by improving how they work. This approach focuses on totally how they work. This approach focuses on totally satisfying both customers and employees. satisfying both customers and employees.

TQMTQMDeming’s Fourteen PointsDeming’s Fourteen Points

1.1. Create consistent purpose for improving Create consistent purpose for improving products and services in order to remain products and services in order to remain competitive.competitive.

2.2. Adopt a new philosophy. We are now living in Adopt a new philosophy. We are now living in a new economic age.a new economic age.

3.3. Stop depending on mass inspection. Require Stop depending on mass inspection. Require instead that quality is built in.instead that quality is built in.

4.4. Consider quality as well as price in awarding Consider quality as well as price in awarding business.business.

5.5. Constantly improve the system of production Constantly improve the system of production and service.and service.

6.6. Institute a vigorous program of job training.Institute a vigorous program of job training.

Deming’s 14 points cont’dDeming’s 14 points cont’d

7.7. Adopt and implement leadership. Focus on Adopt and implement leadership. Focus on quality, not productivity.quality, not productivity.

8.8. Drive out fear so that everyone may work Drive out fear so that everyone may work effectively.effectively.

9.9. Break down barriers between departments.Break down barriers between departments.10.10. Eliminate numerical goals, posters, slogans, for Eliminate numerical goals, posters, slogans, for

the work force that ask for new levels of the work force that ask for new levels of productivity without providing new methods.productivity without providing new methods.

11.11. Eliminate work standards that prescribe Eliminate work standards that prescribe numerical quotas.numerical quotas.

Deming’s 14 points cont’dDeming’s 14 points cont’d

12.12. Remove barriers that stand between the hourly Remove barriers that stand between the hourly worker and his or her right to pride of worker and his or her right to pride of workmanship.workmanship.

13.13. Encourage education and self-improvement for Encourage education and self-improvement for everyone.everyone.

14.14. Create a structure in top management that will Create a structure in top management that will work every day to achieve the above 13 points.work every day to achieve the above 13 points.

Most companies that have adopted TQM found that Most companies that have adopted TQM found that the performance of their companies improved.the performance of their companies improved.

International ManagementInternational Management

ThailandThailand The social culture of Thailand has given The social culture of Thailand has given

rise to highly centralized corporations with rise to highly centralized corporations with strict lines of authority. Self-managed strict lines of authority. Self-managed teams would not be a viable management teams would not be a viable management style because workers are used to taking style because workers are used to taking direction from leaders whose authority is direction from leaders whose authority is absolute and based on status.absolute and based on status.

Japanese Management PracticesJapanese Management Practices

Japanese managers encourage more employee Japanese managers encourage more employee participation in decision making.participation in decision making.

Japanese managers show deeper concern for Japanese managers show deeper concern for the personal well-being of their employees.the personal well-being of their employees.

Rather than present their workers with Rather than present their workers with demands, Japanese managers tend to demands, Japanese managers tend to facilitate decision making by teams of facilitate decision making by teams of workers.workers.

Japanese Business Practices cont’dJapanese Business Practices cont’d

Japanese business practices have been successfully Japanese business practices have been successfully exported to the United States at Honda’s plant in exported to the United States at Honda’s plant in Marysville, Ohio. Unlike most American plants, Marysville, Ohio. Unlike most American plants, where there is a clear distinction between workers where there is a clear distinction between workers and managers, all Honda employees are empowered and managers, all Honda employees are empowered to make decisions. As a result, Honda employees are to make decisions. As a result, Honda employees are energetic and committed to producing high-quality energetic and committed to producing high-quality products. They turn out one Honda Accord per products. They turn out one Honda Accord per minute. This high level of productivity is attributed minute. This high level of productivity is attributed to several innovative (new, original, groundbreaking) to several innovative (new, original, groundbreaking) management practices, where workers are organized management practices, where workers are organized by teams rather than by function.by teams rather than by function.

HERZBERG’S HERZBERG’S Motivation-Hygiene TheoryMotivation-Hygiene Theory

Psychologist Psychologist Frederick HerzbergFrederick Herzberg believed that: believed that: IntrinsicIntrinsic—natural, real—factors are related to —natural, real—factors are related to

job satisfaction &job satisfaction & ExtrinsicExtrinsic factors are related to job factors are related to job

dissatisfaction. dissatisfaction.

Herzberg’s Theory cont’dHerzberg’s Theory cont’d

On the other hand, when employees were On the other hand, when employees were dissatisfied, they tended to cite dissatisfied, they tended to cite extrinsic factorsextrinsic factors such as such as company policycompany policy and and administrationadministration, , supervisionsupervision, , interpersonalinterpersonal relationshipsrelationships, and , and working conditionsworking conditions..

Herzberg suggested emphasizing Herzberg suggested emphasizing motivatorsmotivators——those factors that increase job satisfaction, such as those factors that increase job satisfaction, such as recognitionrecognition and and growthgrowth..

Hygiene FactorsHygiene Factors Herzberg’s term for factors such as:Herzberg’s term for factors such as:

– Working conditionsWorking conditions and and SalarySalary—when these factors —when these factors are adequate, people will not be dissatisfied, but are adequate, people will not be dissatisfied, but neither will they be satisfied.neither will they be satisfied.

– These factors may eliminate job dissatisfaction but These factors may eliminate job dissatisfaction but do not necessarily increase job satisfaction.do not necessarily increase job satisfaction.

Herzberg proposed that his findings indicate that the Herzberg proposed that his findings indicate that the opposite of “satisfaction” is “no satisfaction” and the opposite of “satisfaction” is “no satisfaction” and the opposite of “dissatisfaction” is “no dissatisfaction.”opposite of “dissatisfaction” is “no dissatisfaction.”

Herzberg’s TheoryHerzberg’s Theory He believed that an individual’s attitude toward He believed that an individual’s attitude toward

his or her work can very well determine success or his or her work can very well determine success or failurefailure

Intrinsic factorsIntrinsic factors such as such as achievementachievement, , recognitionrecognition, , and and responsibilityresponsibility were related to job satisfaction were related to job satisfaction

When people felt good about their work, they When people felt good about their work, they tended to attribute these characteristics to tended to attribute these characteristics to themselves.themselves.

David McClelland’s David McClelland’s Three-Needs TheoryThree-Needs Theory

The The three needsthree needs are the major motives in work: are the major motives in work:– The need for The need for AchievementAchievement: : (nAch)(nAch) The drive to excel, The drive to excel,

to achieve in relation to a set of standards, and to strive to achieve in relation to a set of standards, and to strive to succeed.to succeed.

– The need for The need for PowerPower: : (nPow)(nPow) The need to make others The need to make others behave in a way that they would not have behaved behave in a way that they would not have behaved otherwise.otherwise.

– The need for The need for AffiliationAffiliation: : (nAff)(nAff) The desire for friendly The desire for friendly and close personal relationships.and close personal relationships.

Findings of McClelland’s TheoryFindings of McClelland’s Theory McClelland found that some people have a compelling drive McClelland found that some people have a compelling drive

to succeed for personal achievement rather than for the to succeed for personal achievement rather than for the rewards of success.rewards of success.

High achievers perform best when they perceive that they High achievers perform best when they perceive that they have a 50-50 chance of success.have a 50-50 chance of success.– They dislike gambling when the odds are high because they They dislike gambling when the odds are high because they

get no satisfaction from happenstance (fluke or accidental) get no satisfaction from happenstance (fluke or accidental) successsuccess

– They also dislike low odds (high probability of success) They also dislike low odds (high probability of success) because then there is no challenge to their skills.because then there is no challenge to their skills.

– They like to set goals that stretch themselves a little.They like to set goals that stretch themselves a little.

J. Stacey Adams Equity TheoryJ. Stacey Adams Equity Theory Adam’s theory that employees perceive what they Adam’s theory that employees perceive what they

get from a job get from a job (outcomes)(outcomes) in relation to what they in relation to what they put into it put into it (inputs)(inputs) and then compare their input- and then compare their input-outcome ratio with the input-outcome ratios of outcome ratio with the input-outcome ratios of relevant others.relevant others.

If workers compare themselves, a state of equity If workers compare themselves, a state of equity exists.exists.

They believe that their situation is fair—that They believe that their situation is fair—that justice prevails.justice prevails.