Management: Historical Development

The Pre-modern Era

Ancient massive construction projects◦Egyptian pyramids◦Great Wall of China

Adam Smith’s Contribution To The Field Of Management

Wrote the Wealth of Nations (1776)◦Advocated the economic advantages

that organizations and society would reap from the division of labor: Increased productivity by increasing

each worker’s skill and dexterity. Time saved that is commonly lost in

changing tasks. The creation of labor-saving

inventions and machinery.

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.

The Industrial Revolution’s Influence On Management

Practices

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Classical ContributionsClassical approach

◦The term used to describe the hypotheses of the scientific management theorists and the general administrative theorists.

Scientific management theorists Fredrick W. Taylor and Frank and Lillian

Gilbreth,

General administrative theorists Henri Fayol and Max Weber

Management Theory

Classical Approaches Frederick Taylor: Scientific Management (1886) Frank and Lillian Gilbreth: Time/motion studies (later 1800s) Henri Fayol: 14 Principles of Management (1880s-1890s) Max Weber : Bureaucracy (1920s)

Behavioral Approaches The Hawthorne Experiment (1927) MacGregor’s Theory X and Theory Y (1960)

Quantitative Approaches Contemporary Approaches

Ouchi’s Theory Z (1981) Contingency Management

Branches of Classical Theory1. Scientific Management2. Administrative Theory3. Bureaucracy

The Evolution of Management Theory

Classical Approaches

Frederick Taylor: Scientific Management (1886)

Frank and Lillian Gilbreth: Time and motion studies (later 1800s)

Henri Fayol: Fourteen Principles of Management (1880s-1890s)

Max Weber : Bureaucracy (1920s)

F.W. Taylor and Scientific Management

Developed Scientific ManagementLaid foundation for the study of

managementScientific Management is the

systematic study of the relationships between people and tasks for the purpose of redesigning the work process to increase efficiency.

Basics of Scientific Management

The concept of Scientific management implied the application of Science or management Each task must be scientifically designed so

that it can replace the old, rule-of-thumb methods.

Workers must be scientifically selected and trained so that they can be more productive on their job.

Bring the scientifically designed jobs and workers together so that there will be a match between them.

There must be division of labor and cooperation between management and workers.

Taylor’s Four Principles of Management

1. Time-and-Motion study: Study the way workers perform their tasks, gather all the

informal job knowledge that workers possess and experiment with ways of improving how tasks are performed.

2. Scientific Task Planning Scientific task is the amount of work which an average

workers can perform during a day under normal working conditions. The ultimate goal is to see that work is done in a logical sequence promoting maximum efficiency.

Standards have to be set in advance for the task, material, work methods, quality, working conditions etc.

3. Scientific Selection of Personnel Put right worker in right job, find

limitations, train Carefully select workers who possess

skills and abilities that match the needs of the task, and train them to perform the task according to the established rules and procedures

Taylor’s Four Principles of Management

4. Differential Piece rate system Designed to pay based on the actual performance

A system of financial incentives is also needed

In this scheme, a worker who completes the normal work gets wages

at high rate per piece than a worker who complete the same within the

time limit set by the management.

5. Functional foremanship In order to achieve better production control, factor is divided into

several components, each in charge of a specialist, namely, instruction

card clerk, cost & time clerk etc.

These Functional specialist perform the planning function and provide

expert advice to workers.

Manager plans, prepares, inspects and Worker does the actual work

Codify the new methods of performing tasks into written rules and

standard operating procedures

Division of work between manager and workers

Problems with Scientific Management

Managers frequently implemented only the increased output side of Taylor’s plan. (Exploitative device)◦ Workers did not share in the increased output.

(Undemocratic)Specialized jobs became very boring, dull.

◦Workers ended up distrusting the Scientific Management method.

Workers could purposely “under-perform.”◦Management responded with increased use of

machines and conveyors belts.

Frank & Lillian Gilbreth Endorsed piece-work and suggested a

higher rate per unit if his directions were followed.

Disagreed with Taylor’s idea that management should choose which workers took which jobs.

Frank and Lillian Gilbreth Bricklaying efficiency improvements Time and motion studies (therbligs)

1. Break up and analyze every individual action necessary to perform a particular task into each of its component actions

2. Find better ways to perform each component action

3. Reorganize each of the component actions so that the action as a whole could be performed more efficiently-at less cost in time and effort

Frank & Lillian Gilbreth

Administrative Management Theory(1. Henri Fayol & 2. Max Weber)

Administrative Management◦The study of how to create an

organizational structure that leads to high efficiency and effectiveness

◦The theory which explained the process of managing an organization from the top managerial perspective.

◦An approach that focuses on principles that can be used by managers to coordinate the internal activities of organization.

Henri Fayol Firstly classify business operations into six major

activities: Technical, commercial, financial, security, accounting and managerial.

More focused on Management and came up with the five basic functions of management —Planning, Organizing, Commanding, Coordination, and Controlling

First wrote that management is a set of principles which can be learned.

Developed Fourteen Principles of Management

Fayol’s Fourteen Principles of Management

Division of work

Authority

Discipline

Unity of command

Unity of direction

Subordination of the individual

Remuneration

Centralization

Scalar chain (Line of Authority)

Order

Equity

Stability of tenure of personnel

Initiative

Esprit de corps

HENRI FAYOL’s FOURTEEN PRINCIPLES

OF MANAGEMENT

1. Division of Work or Specialization of labor. Specializing encourages continuous improvement in skills and the development of improvements in methods to improve productivity.

2. Authority & Responsibility. The right to give orders and the power to exact obedience.

3.Discipline. No slacking, bending of rules. Employees must obey, but this is two-sided: employees will only obey orders if management play their part by providing good leadership.

4. Unity of command. Each employee should have only one boss with no other conflicting lines of command.

5. Unity of direction. People engaged in the same kind of activities must have the same objectives in a single plan. This is essential to ensure unity and coordination in the enterprise. Unity of command does not exist without unity of direction.

6. Subordination of Individual Interests. Management must see that the goals of the firms are always paramount. So, when people at work, only work things should be pursued or thought about.

7. Remuneration. Employees receive fair payment for services, not what the company can get away with.

8. Centralization. Consolidation of management functions. Decisions are made from the top.

9. Equity. Equality of treatment (but not necessarily identical treatment)

10. Scalar Chain (line of authority). Formal chain of command running from top to bottom of the organization, like military

11. Order. All materials and personnel have a prescribed place, and they must remain there.

12. Stability of Tenure of Personnel. Long-term employment is important for the development of skills that improve the organization’s performance. Employees work better if job security and career progress are assured to them.

13. Initiative. Fostering creativity and innovation by encouraging employees to act on their own.

14. Esprit de corps. Harmony, cohesion among personnel.

Max Weber’s Principles of Bureaucracy

Coined “bureaucracy”: the perfect office Developed the principles of bureaucracy as a

formal system of organization and administration designed to ensure efficiency and effectiveness.

Bureaucracy: Ideal type of organization characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships

Well defined chain of command Clear division of work (job descriptions) Procedures for any situation (Formal Rules &

Regulations, formal selection) Impersonal Career Orientation Inflexible Rigid

Weber’s Ideal Bureaucracy

Weber’s Principles of Bureaucracy

Weber’s Principles of Bureaucracy

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Weber’s Principles of Bureaucracy

1) A manager’s formal authority derives from the position he holds in the organization.

2) People should occupy positions because of their performance, not because of their social standing or personal contacts.

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Weber’s Principles of Bureaucracy

3) The extent of each position’s formal authority and task responsibilities and it’s relationship to other positions should be clearly specified.

4) Authority can be exercised effectively when positions are arranged hierarchically, so employees know whom to report to and who reports to them.

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Weber’s Principles of Bureaucracy

5) Managers must create a well-defined system of rules, standard operating procedures, and norms so they can effectively control behavior .

Rules, SOPs and Norms

Rules – formal written instructions that specify actions to be taken under different circumstances to achieve specific goals

Standard Operating Procedures (SOPs) – specific sets of written instructions about how to perform a certain aspect of a task

Norms – unwritten, informal codes of conduct that prescribe how people should act in particular situations

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Behavioral Management Theory

Behavioral Management◦The study of how managers should

personally behave to motivate employees and encourage them to perform at high levels and be committed to the achievement of organizational goals.

The Behavioral Approach

The Human Relations Movement◦An effort to make managers more

sensitive to their employees’ needs◦Arose out of the influences of

The threat of unionization The Hawthorne studies The philosophy of industrial humanism

Behavioral Approaches

Elton Mayo: The Hawthorne Experiment (1927)

McGregor’s Theory X and Theory Y (1960)

Behavioral Management Theory

Mary Parker Follett

◦ Recognized that organizations could be viewed from the perspective of individual and group behavior.

◦ Concerned that Taylor ignored the human side of the organization

Suggested workers help in analyzing their jobs

If workers have relevant knowledge of the task, then they should control the task

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The Hawthorne Studies

Studies of how characteristics of the work setting affected worker fatigue and performance at the Hawthorne Works of the Western Electric Company from 1924-1932.◦Illumination Study◦Group Study

Human Relations Movement

◦Grew out of the Hawthorne studies.◦Proposed that workers respond

primarily to the social context of work, including social conditioning, group norms, and interpersonal dynamics.

◦Assumed that the manager’s concern for workers would lead to increased worker satisfaction and improved worker performance.

The Hawthorne Experiment Research conducted at the Hawthorne

plant of the Western Electric Company near Chicago, 1927-1937

Initial study: effects of lighting on worker performance

Worker productivity was measured at various levels of light illumination.

Researchers found that regardless of whether the light levels were raised or lowered, worker productivity increased.

Human Relations (Hawthorne) Implications

Hawthorne effect — workers’ attitudes toward their managers affect the level of workers’ performance

Human relations movement – advocates that supervisors be behaviorally trained to manage subordinates in ways that elicit their cooperation and increase their productivity

Behavior of managers and workers in the work setting is as important in explaining the level of performance as the technical aspects of the task

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The Hawthorne Studies

Demonstrated the importance of understanding how the feelings, thoughts, and behavior of work-group members and managers affect performance

Douglas McGregor proposed the two different sets of assumptions about workers.

Theory X - classical theory: It assumes that average workers Are lazy and dislike work and will do as little as

possible. They are motivated only by money and do not care about the job.

Workers have little ambition and wish to avoid responsibility and average worker prefers direction

Managers must closely supervise and must be carefully controlled through reward and punishment

Theory X and Theory Y

Theory Y: Modern Management Theory Theory Y assumes workers are not lazy, want to do a

good job. People often enjoy their work and will exercise self-

control at work. People are motivated by wanting to do a good job and

will do well if the opportunity is presented People have capacity for imagination, ingenuity, and

creativity People enjoy expending physical and mental effort in

work as much as play and rest

Theory X and Theory Y

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Theory X vs. Theory Y

Contemporary Approaches

Ouchi’s Theory Z (1981) Contingency Management

Ouchi’s Theory Z Theory Z

Value of culture in an industrial society

Intimate and cooperative work relationships

Alienated in work environment in which family ties, traditions, and social institutions are minimized

Workers have strong sense of moral obligation, discipline and order

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Organizational Environment Theory

Organizational Environment – The set of forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources

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The Open-Systems View

Open System◦A system that takes resources for its external environment and transforms them into goods and services that are then sent back to that environment where they are bought by customers.

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The Open-Systems View

◦Inputs: the acquisition of external resources to produce goods and services

◦Conversion: transforms the inputs into outputs of finished goods and services.

◦Output: the release of finished goods and services to its external environment.

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Closed System

A self-contained system that is not affected by changes in its external environment.

Likely to experience entropy and lose its ability to control itself

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Contingency Theory

“There is no one best way to organize”

The idea that the organizational structures and control systems manager choose depend on—are contingent on—characteristics of the external environment in which the organization operates.

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Contingency Theory

Contingency Management

Managing in Different and Changing Situations

Require managers to use different approaches and techniques

Contingency perspective - different ways of managing are required in different organizations and different circumstances stresses that there are no simplistic

or universal rules contingency variable© Prentice Hall, 2002