Honors Business Management

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1 AT THE LIBRARY Honors Business Management Chapter 2 Management Theory Key Questions Section 2.1: What s the payoff in studying different management perspectives, both yesterday s and today s? Section 2.2: If the name of the game is to manage more efficiently, what can the classical viewpoint teach me? Section 2.3: To understand how people are motivated to achieve, what can I learn from the behavioral viewpoint? Section 2.4: If the manager s job is to solve problems, how might the two quantitative approaches help? Section 2.5: How can the exceptional manager be helped by the systems viewpoint? Section 2.6: In the end, is there one best way to manage all situations? Section 2.7: Can the quality management viewpoint offer guidelines for true managerial success? Section 2.8: Organizations must learn or perish. How do I build a learning organization? Knowledge has to be improved, challenged, and increased constantly, or it vanishes. Peter Drucker Vocabulary Peter Drucker Evidence-based management Jeffrey Pfeffer Robert Sutton Historical perspective Contemporary perspective Therblig Classical viewpoint Scientific management Frederick W. Taylor Frank and Lillian Gilbreth Soldiering Motion studies Differential rate system Administrative management Henri Fayol Max Weber Bureaucracy Behavioral viewpoint Human relations movement Hugo Munsterberg Industrial psychology Mary Parker Follett Integration Self-managed teams Elton Mayo Hawthorne effect social man Abraham Maslow Hierarchy of needs Douglas McGregor William Ouchi Theory X Theory Y Theory Z Self-fulfilling prophecy Behavioral science Quantitative management Management science Operations research Operations management Systems viewpoint System Subsystem Inputs Outputs Transformation process Feedback Open system Closed system Contingency viewpoint Quality management viewpoint Quality Quality control Quality assurance W. Edwards Deming Joseph M. Juran Total Quality Management Learning organization Virtual organizations Boundaryless organization Knowledge worker Human capital Social capital Independent Sections Manager s Toolbox p. 39 Section 2.6: Contingency Viewpoint pp Section 2.8: The Learning Organization in an Era of Accelerated Change 1

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3 Fayol s 14 Points Fayol s general principles of management are as follows: 1. Division of work: Work specialization can result in efficiencies and is applicable to both managerial and technical functions. Yet there are limitations to how much that work should be divided. 2. Authority: Authority is the right to give orders and the power to exact obedience. It derives from the formal authority of the office and from the personal authority based on factors like intelligence and experience. With authority comes responsibility. 3. Discipline: Discipline is absolutely necessary for the smooth running of an organization, but the state of discipline depends essentially on the worthiness of its leaders. 4. Unity of command: An employee should receive orders from one superior only. 5. Unity of direction: Activities aimed at the same objective should be organized so that there is one plan and one person in charge. 6. Subordination of individual interest to general interest: The interests of one employee or group should not prevail over the interests and goals of the organization. 7. Remuneration: Compensation should be fair to both the employee and the employer. 8. Centralization: The proper amount of centralization or decentralization depends on the situation. The objective is the optimum use of the capabilities of personnel. 9. Scalar chain: A scalar [hierarchical] chain of authority extends from the top to the bottom of an organization and defines the communication path. However, horizontal communication is also encouraged as long as the managers in the chain are kept informed. 10. Order: Materials should be kept in well-chosen places that facilitate activities. Similarly, due to good organization and selection, the right person should be in the right place. 11. Equity: Employees should be treated with kindness and justice. 12. Stability of personnel tenure: Because time is required to become effective in new jobs, high turnover should be prevented. 13. Initiative: Managers should encourage and develop subordinate initiative to the fullest. 14. Esprit de corps. Since union is strength, harmony and teamwork are essential. Assignment: Compare and contrast Fayol s management principles with Weber s management principles. Your answer should be approximately 2-4 paragraphs in length. 3

4 The human relations movement came to be considered too simplistic for practical use. However, some companies are able to come up with creative ways to keep employees satisfied. Each year the Great Place to Work Institute ranks America s top employers in the annual Best Companies To Work For. Go to the institute s web site ( and find their list of best Fortune 500 companies. Please type your responses to the following questions. Be sure to put your name on the top of the paper. 1. List the top five companies. Best Companies to Work For 2. Choose one company from the list and use an Internet search engine to research the company. Summarize the company s background and mission. 3. Follow the links to the Institute s listing for the previous year. Where did the top five companies you listed in question 1 rank during the previous year? If the rankings were different, what do you think caused the company s rank to change? 4. List ten examples of practical applications of the behaviorist theories at work in these companies. In other words, what specifically do these companies do to try to motivate their employees by understanding human behavior? 4

5 Too Much of a Good Thing? Highly productive workers are keeping manufacturing jobs in tiny Pella, Iowa. But they're also foiling economic growth. Matthew Swibel IN ANOTHER LIFE Mark Zylstra might have been a Swiss watchmaker. For now the 31-year-old plant manager is content to lord over a factory floor of Vermeer Manufacturing Co. in Pella, Iowa, pointing to a directional drill assembly line that used to be cluttered with 20 days' worth of parts inventory. Zylstra and a group of seven studied the problem, then resolved to stack those parts 50 feet away in the machine shop area. Seems trivial, but the move allowed the plant to cut 10 days' worth of inventory--zylstra is now trying to halve that number and free up $600,000 a year--and also helped make room for eight new assemblyline workers (who spend less time looking for scattered parts). "We do this stuff for survival," says Mary Andringa, Vermeer's co-chief executive and the founder's daughter. Factory owners have been doing such things for survival ever since Frederick W. Taylor invented timeand-motion studies more than a century ago. Productivity at Vermeer, a $500 million (sales) manufacturer of industrial and farm machinery, has risen an average 4% in each of the last seven years, the result of thousands of changes to production methods. Among them: suggesting how many blueprints an engineer should have on his desk, deciding how far to travel to perform an assembly-line task and reducing the time it takes to hire and orient a new employee from 23 to 7 days. "If you're not doing lean manufacturing," says Zylstra, "someone's gonna put you out of business." He picked up that line working down the road at Pella Corp., the $1 billion (sales) company where over eight years he saw window units roll off the line every 108 seconds; productivity has gained an estimated 2% each year. Such continual, incremental improvements have helped the two largest private employers in Pella keep manufacturing jobs from being exported abroad. Across Iowa 17 factories shuttered last year, according to Plant Closing News; the state has 28,000 fewer manufacturing positions since Vermeer and Pella between them offer a combined 5,500 nonunion jobs in a town where 7,500 working-age adults live. Within the last 12 months the two companies have brought 650 new manufacturing jobs to their home base. Unemployment in the Pella area stands at 4.2%, a full point below the national average. Workers in Iowa's manufacturing and mining sectors-- the two areas most influenced by Pella residents' output--earn an average $758 a week, the highest wages of any nonfarming industry in the state. Not exactly a millionaire's refuge, but in how many other rural spots can you play the quintessential capitalist sport, golf, as you can at Pella's own Bos Landen Golf Resort? "I do realize I don't live in the real world sometimes," allows David Vollmar, executive director of the Pella Area Chamber of Commerce. A little too perfect, perhaps. While driving up their efficiency, Pella Corp. and Vermeer have effectively slammed the door on other sizable businesses that have tried to plant a foot. "We've created two great manufacturing companies," says Vollmar. "But I can't find anyone else to come here because they're worried about the tightness of the labor market." It makes for timidity at home: Pella doesn't have many entrepreneurial spinoffs from its two largest employers. The city's job growth over the last five years? Nil. Blame the chilling effect for the painstaking seven years it took Vollmar to convince Brown's Shoes to open a store in Pella. Given the three-shift schedules at Pella Corp. and Vermeer, would employees have enough time to shop? Recent town hearings on property rezoning for a Wal-Mart expansion drew fierce debate. "If my son doesn't want to work in a plant, there's nothing else for him to do. At least Wal-Mart will mean more jobs." So argued a woman resident and Wal-Mart employee in favor of the expansion. (The rezoning measure passed.) She got it right. As a two-company town, Pella can't inoculate itself against a downturn. It lost 1,000 or so manufacturing jobs between 2001 and 2002, causing the decline of approximately $58 million in earned income. Founded in 1847 by Dutch immigrants, Pella provided rich soil for grain and corn. A childhood home of Wyatt Earp, the city was a forgettable Chicago-Rock Island- Pacific rail depot, 45 miles southwest of Des Moines. In 1925 lumber entrepreneur Peter Kuyper made an initial $5,000 down payment to buy Rolscreen Co., maker of an early insect screen for windows that rolled out of sight. What eventually became Pella Corp. sells mostly residential windows and doors in North America, Japan and China. Pella had an army of window plant workers after World War II, when farmer Gary Vermeer turned a modest invention--a modified farm wagon with a mechanical hoist--into a company in Armed with only a high-school diploma, Vermeer introduced the world's first large, round haybaler in Like Case and Deere before it, Vermeer branched off from farm machines into 5

6 construction machines. It does a thriving business in directionaldrilling equipment used, among other things, to lay fiberoptic cable. Most of the city's dozen or so factory ventilation stacks belong to either Pella Corp. or Vermeer. So, in effect, do a few ecclesiastical spires: Each firm's charitable programs benefit churches (the town's church-to-bar ratio is 29:2). There are a restored opera house, an indoor community swimming pool and a $2.5 million Dutch-built working windmill--all paid for mostly by the charitable foundations of Pella Corp. and Vermeer or members of these firms' founding families. Sloping gambrel rooflines fill the downtown Pella streetscape, where stores still stock Dutch-spiced beef, Dutch lace and Dutch pastries. What you won't find in Pella is a union rep, despite some earnest rounds of knocking on doors by union organizers. The average annual wage growth in Pella puts it 426 out of 573 small towns measured by the Policom Corp., an economic development firm. Vermeer offers free doctor and nurse visits to workers and their families. Both companies foot the tuition bill for its employees to get college and postgraduate degrees. "Unions will tell you they can offer you better pay and benefits," says Bruce Severson, production area manager at Vermeer. "But I'm not convinced." Strict union job classifications stifle innovation, says William Schwartz, a business consultant who has run workshops at Pella Corp. on kaizen, the Japanese art of continual improvement. Indeed, some of the best ideas have emerged from weeklong brainstorming events involving ten or so workers from different job categories. Unfettered by job assignments, participants can set an objective--say, to reduce production errors or streamline order entry--or come up with novel product ideas. One such session gave rise to a Pella innovation this year: betweenthe-glass cordless blinds and shades (window and patio-door treatments tucked between panes of glass and away from dust and yanks from kids). Efficiency can carry you only so far. In another company town 30 miles to the north a more famous manufacturer put itself through similar cycles of self-improvement. The results at Maytag-300 layoffs in the past 18 months and warnings last month that the flagship laundry machine factory is in deep trouble-- have sent town leaders on a desperate scramble to secure a new economic lifeline. Their answer: a $76 million Nascar racetrack that will be partly subsidized by the state. Iowa legislators are also putting up $100 million in order to attract 300 companies and bring 15,000 jobs to the state. What worries Vollmar in Pella is that he's not high on their list. "I've struggled for 12 years to find the next Pella Corp. or Vermeer," he says. "And I haven't had anyone close to discussion." Forbes; 5/23/2005, Vol. 175 Issue 11, p Questions for Review 1. Briefly state the main idea of this article? List three important facts that the author uses to support the main idea. 2. What is kaizen? 3. What are the benefits and drawbacks to unions? 4. Why is the town trying to attract new businesses? 5. What examples of management theories in action did you find in the article? 6

7 Deming s Recommendations for Management In his book Out of the Crisis, Dr. W. Edwards Deming presented 14 steps toward an improved management. 1. Create constancy of purpose for improvement of product and service with the aim to become competitive and to stay in business, and to keep providing jobs. 2. Adopt the new philosophy. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change. 3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place. 4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust. 5. Improve constantly and forever every process for planning, production and service. Improve quality and productivity, and thus constantly decrease costs. 6. Institute training on the job. This should be a part of everybody s everyday activities. 7. Adopt and institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul as well as supervision of production workers. 8. Drive out fear so that everyone may work effectively for the company because they want it to succeed. 9. Break down barriers between staff areas or departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service. 10. Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. 11. Eliminate numerical quotas for the workforce and numerical goals for management. a. Eliminate work standards (quotas) on the factory floor. Substitute leadership. b. Eliminate the obsolete concept of management by objective. Eliminate management by numbers, numerical goals. Substitute leadership. 12. Remove barriers that rob people of pride of workmanship eliminate the annual rating or merit system. a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. 13. Institute a vigorous program of education and self-improvement for everyone. Let them participate to choose the areas of development. 14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody s job. (Source: Enrique Mora, W. Edwards Deming, His 14 Recommendations Changed the History of Japan and the World, September 8, 2004, Total Productive Maintenance Online.) Assignment: Identify which of Deming s 14 steps are also elements of other researchers findings. Also note which of the 14 steps are unique to Deming. Your answer may be in paragraph or chart form. 7

8 Movie Gung Ho 1. Which management theory do you think the Japanese are using at the start of the film? 2. Why does Hunt Stevenson travel to Japan? 3. What effect did the closing of the factory have on the town? 4. How would you critique Hunt s presentation to the Japanese executives? 5. What management role(s) does Hunt fulfill when he speaks at the union meeting? 6. Why does the company day start with exercise? What management theory does this reflect? 7. What management theory do the Japanese use when they review the work of the employees to achieve zero defects? 8

9 8. Why do the Japanese want the employees to learn each part of the job? 9. What solution does Hunt have to the problem of low production? What management theory or theories would agree with this solution? 10. For what did Kazihiro have to apologize to his workers? 11. When Kazihiro confronts his boss, what challenge of management did he believe the Japanese model failed to achieve? 12. Which management theory is in use when the workers try to make the last 1,000 cars? 13. What management theory is being used when Sakamoto rejects the car during the final count? 9

10 Chapter 2 Review Part A Questions for Review 1. Discuss how management is an art and a science. 2. List the four reasons for studying theoretical perspectives. 3. List the three historical management approaches. 4. What was ultimately determined to be true about the Hawthorne Effect? 5. Give one real-life example of operations research. 6. List the three viewpoints of the contemporary perspective. 7. List the four parts of a system. 8. Give a real-life example of the contingency perspective. 9. What is the difference between quality control and quality management? 10. List the four components of Total Quality Management. 11. List the three parts of a learning organization. 12. List the three key functions of the learning organization. 13. List the consequences of accelerated change as they relate to organizations. 14. With the systems viewpoint in mind, list at least two examples for each of the following: (a) inputs; (b) outputs; (c) transformational process; (d) feedback. Part B Vocabulary Review Administrative management Behavioral science Behavioral viewpoint Classical viewpoint Closed system Contemporary perspective Contingency viewpoint Feedback Historical perspective Efficient Human relations movement Inputs Learning organization Management science Open system Operations management Outputs Quality assurance Quality control Quality management viewpoint Quantitative management Scientific management Subsystems System Systems viewpoint Total quality management Transformation process 1. is concerned with managing the total organization. 2. The emphasized the importance of understanding human behavior and of motivating employees toward achievement. 3. The proposed that better human relations could increase worker productivity. 4. relies on scientific research for developing theories about human behavior that can be used to provide practical tools for managers. 5. is the application to management of quantitative technologies such as statistics and computer simulations and focuses of using mathematics to aid in problem solving. 6. focuses on managing the production and delivery of an organization s products or services more effectively. 7. A is a set of interrelated parts that operate together to achieve a common purpose and are parts making up the whole system. 10

11 8. The regards the organization as a system of interrelated parts. 9. are the people, money, information and materials required to produce an organization s good or services and are the products, services, profits, losses and employee satisfaction and discontent that are produced by the organization. 10. are the organization s capabilities in management and technology that can be applied to converting inputs into outputs. 11. Information about the relationship of the environment to the outputs that affect inputs is. 12. A(n) continually interacts with its environment wheras a has little interaction with its environment. 13. The emphasized that a manager s approach should vary according to the individual and the environmental situation. 14. includes quality control, quality assurance and TQM. 15. refers to the total ability of a product or service to meet customer needs. Part C Multiple Choice 1. The classical viewpoint is part of what perspective? a. management b. historical 2. Who formulated the Hawthorne effect? a. Fayol b. Hawthorne c. quality d. contingency c. Munsterberg d. Mayo 3. All of the following make up the four parts of a system except: a. subsystems c. outputs b. inputs d. feedback 4. All of the following are components of TQM except: a. get every employee involved b. listen and learn from customers c. use quality control to identify and eliminate problems d. make continuous improvement a priority 5. Which is not part of a learning organization? a. transferring knowledge b. modifying behavior c. creating knowledge d. controlling knowledge 6. Max Weber felt bureaucracies should have all of the following functions except: a. formal rules and regulations c. well-defined hierarchy of authority b. impersonality d. narrow spans of control 7. The classical viewpoint is too: a. strict b. bureaucratic c. mechanistic d. organic 11

12 8. Who were proponents of scientific management? a. Taylor and Maslow b. Taylor and Gilbreth c. Weber and McGregor d. Follet and Mayo 9. The contingency perspective includes which of the following viewpoints? a. quality management c. behavioral b. classical d. quantitative 10. Taylor and Weber were proponents of which of viewpoint? a. classical b. analytical 11. Which term best describes Munsterberg, Follet and Mayo? a. humanists b. human relationists c. administrative management d. behavioral c. behaviorists d. managers 12. Douglas McGregor s negative, pessimistic view of workers was which of these theories? a. Theory X c. Theory Z b. Theory Y d. Theory Sigma 13. Operations management focuses on what? a. problem solving techniques b. productivity c. effective production and delivery of products d. effective management of people and services 14. Quality refers to: a. strategy of minimizing errors by managing each stage of production b. urging employees to strive for zero defects c. total ability of a product or service to meet customer needs d. all of above 15.Which of the following is not part of the contemporary perspectives? a. organizations management c. contingency b. systems d. quality management Part D True and False 1. The systems viewpoint regards the organization as a system of interrelated parts. 2. A closed system continuously interacts with its environment. 3. TQM has four approaches. 4. The historical perspective includes 3 viewpoints: systems, contingency and quality-management. 5. Taylor and Gilbreth pioneered the classical viewpoint 6. Mary Weber focused on the positive aspects of bureaucracies. 7. The Hawthorne studies have stood the test of time. 8. Maslow was a human relationist. 9. Feedback is part of a system. 10. To create learning organizations, managers transfer knowledge to customers. 12