The Influence of Classical and Human-Relations Approaches in Management Today, A Critical Evaluation.

The Influence of Classical and Human-Relations Approaches in Management Today, A Critical Evaluation. Prepared for University of South Wales Dr. Leonidas Efthymiou Management Theories and Philosophies (BS4S02-V1) Prepared by MBA Student Mouhab Yacoub October 23 rd, 2016

1. Acknowledgment The author of this dissertation would like to express his deepest appreciation to the module tutor Dr. Leonidas Efthymiou for his endless efforts. Without his guidance and persistent help, this dissertation would not have been possible. It is believed that the knowledge and skills obtained did not only facilitate writing this dissertation but also left the author with knowledge which can be used to understand and realize the history and evolution of management theories, their relevance to today s business practices to meet the challenge of constant business environment changes where uncertainty prevails most of the time. 2. Introduction Management as in English language descends from the Latin language; manus which means hand and, agree which means to act. While management today has many similarities with management in the past decades yet today s constant change of an organization environment -internal or external- and globalization (competitive nature of global economy) among other factors; organizational structure (flat or hierarchical), technology advancement and transition to knowledge based organization, have called for broader management approaches other than those dominated in the last decade. On the other hand, the similarity between today s management approaches (modern and post-modern theories) and those of the past decade are the three main faces of management; (1) Leadership, (2) Control and (3) Developing the organization business. While great emphasis is on effective leadership -to motivate and coach subordinates- one can t neglect the other faces for successful management; to control the business efficiency and to develop the business -strategize, i.e. present application of decision-making, policies and practices to insure future business success (Karlof and Loevingsson, 2005, pp.4). Not shockingly, all three faces have their impact on the organization performance to which each manager seeks to achieve (Safferstone, 2005). Karlof and Loevingsson asserts on efficiency and effectiveness outputs of management approaches -although not directly stating them- especially when we view their work with Michael Porter s value chain theory. Karlof and Loevingsson noted that The basis of all organized business is actually to create a value that is higher than the cost of producing this value (Karlof and Loevingsson, 2005, pp.6), a statement that lends itself to efficiency and effectiveness in management leading so that the organizational performance creates a unique value (see appendix a) Efficiency and effectiveness: In early adopted theories of management. As indicated by Cole and Kelly, The classical approach to management was primarily concerned with the

structure and activities of formal or official organization (Cole and Kelly, 2005, pp.16) that is to say, their concern was how efficient work is done. For Human-Relations theories, they were more interested in the human factor at work; their focus was on the individual satisfaction & motivation as much as efficient use of resources (human resources among them) which leads to effectiveness of operations (tasks); Michaelson (2005) connects between worker motivations and individual/group performance (Cole and Kelly, 2016, pp.62). In this dissertation, we seek to evaluate the influence of Classical and Human Relations approaches on the application of today s strategies adopted by organizations in their organizational practices, policies, seeking well-known organizations for their successful performance (effective and efficient in creating their value) in their industrial sector e.g. Fast Food. The dissertation concludes with the evaluation statement. Firstly, we review the most pertinent Classical and Human-Relations theories to identify their main themes. 3. Review of Classical Theories Safferstone summarizes the history of early ages of management theories and theorists and says, There was need to assure efficient and effective use of traditional factors of production (e.g. Land, Labor and Capital) during the twentieth century due the evolution of work from independent activities (e.g. farmers) to more coordinated work (e.g. factories) and the lake of definition about management at that time (Safferstone, 2005, pp.4). Those early theorists mentioned above are Henry Fayol, Frederick Winslow Taylor, The Gilbreths, Henry Gantt, Lyndal Urwick, Brech, Max Weber and Alvin Gouldner form a group whom we can label their theories as Classical and/or Scientific approaches to management (prescriptively). While Fayol and Taylor are regarded as the fathers of that group, during this same time span, Weber existed (an academic person) where his interest was not how work is to be done, but what form of authority structure of an organization that attains efficiency. In the next lines we will focus on Fayol and Taylor theories only for a comprehensive critical review into these theories as the rest of them are to some extend a tailored copy of either one of them with some modifications inserted except for Max Weber whose theoretical contribution resulted in the well-known Bureaucracy theory of an organization form. 3.1. Fayol s Administrative Theory Henri Fayol is a French Engineer. He worked at Chamberbault, a French mining company, starting as an engineer until he became the company CEO when it was near bankruptcy. Fayol was more concerned with the administrative principles of managing the

activities and resources of an organization. Fayol s contribution to management is identified in three main themes as indicated below (Pryor and Taneja, 2010). 3.1.1. Elements or Functions of Management Fayol believed that organizational and business life was a combination of six activities. These activities are technical, commercial, financial, security, accounting and managerial. These functions are the different sections that make up an organization in his believe. 3.1.2. Definition of Management activities Fayol identified five activities that comprise the managerial function. These activities are forecasting and planning, organizing, coordination, command and control of available resources to achieve a given objective. 3.1.3. General Management Principles Fayol advocated fourteen principles as a guide to performing managerial functions claiming that his list is not exhaustive. They are clearly listed and defined by Cole and Kelly (2016, pp.25); Division of work, Authority, Discipline, Unity of command, Unity of direction, Subordination of individual interests to general interest, Remuneration, Centralization, Scalar chain, Order, Equity, Stability of tenure of personnel, Initiative, Esprit de corps. 3.1.4. Important Notes about Fayol s Principles According to Pryor and Taneja analysis for these fourteen principles, Fayol was the first to distinguish between technical and managerial skills. Division of labor requires specialization of labor enabling people to work efficiently. Fayol differentiated between authority and responsibility. Where authority is the right to give orders and the power to exact obedience, responsibility is a corollary of authority. Fayol s initiative principle lends itself to organizations encouraging and rewarding employees who possess the energy to create innovative ideas and to take the initiative to implement them. All in all, his view to an organization was top down one (Pryor and Taneja, 2010, pp.491-492). Today s concerns about fairness, or the bona fide conflict of interests between groups relate to Fayol s individual versus general interests, remuneration and equity. Also, initiative and esprit de corps indicates Fayol s sensitivity to people s needs as individuals and as groups and indicates Fayol s awareness of the today s need to avoid an excessively mechanistic approach towards employees. The difference is that he saw these principles in the

context of rational model of an organization rather than in terms of adapting structures and changing people s behavior today s view- to achieve the best fit between the organization and its customers. The effect of Fayol s principles on organizational effectiveness has been subject to increasing criticism since such principles were not designed to cope with modern conditions of rapid change, flatter structures and increased employee participation in the decision-making processes of the organization (Cole and Kelly, 2016, pp.25). Exponents of Taylor s theory like Brunsson (2008) postulates that Taylor s theory would have prevailed if Fayol s ideas were better scrutinized, as cited by Pryor and Taneja (2010, pp. 496). 3.2.Taylor s Theory of Scientific Management Frederick Winslow Taylor, like Fayol, was a practical manager-theorist. During Taylor s time, management left the working methods to the initiative of their employees, a behavior called rule-of-thumb by Taylor. He suggested that for efficient performance, management would take this role from workers which lead to separation of planning and control from doing the job itself nowadays. Taylor s themes were based directly on his own experience at work, initially as a shop-floor worker himself and later as a manager in steel companies. Taylor analyzed work and observed steel workers minimal output and discovered the reason for inefficient work practices and related this to the concept of soldiering and rule-of-thumb - problems which could be solved scientifically. He calculated the most efficient way the one best way to perform every job by observing the most skilled craftsman. This in turn resulted in work study; to break the work processes into smaller simpler tasks that could be taught to inefficient workers. According to Cole and Kelly, Taylor studied the jobs of a sample of especially skilled workers, noting each operation and timing it with a stopwatch. All unnecessary movements could then be eliminated in order to produce the best method of doing a job. The best method would become the standard to be used for all like jobs. (Cole and Kelly, 2016, pp. 27). We can summarize Taylor s principles (Taylor, 1919, pp.36-38) as; i. Replace rule-of-thumb by developing laws and scientific principles for work tasks. ii. iii. iv. Scientifically select workpeople and progressively train, teach and develop them to achieve their maximum level of efficiency and prosperity in the jobs that are required. Matching skills level to the designated work task. Work and responsibility are equally divided among worker and employee with management taking the part of planning and control.

3.2.1. Important Notes about Taylor s Theory Taylor s theses was that; (1) the average worker preferred to be given a definite task with clear-cut standards that adoption of his scientific approach would lead to increased prosperity for both the employee and the employer. (2) The employer will rest assured that work is efficiently done with optimized tasks standards. (3) Rewarding the efficient employee without a limit since the work output is measured against standards and the fact that wages were preset based on scientific bases. (4) Employees will accept that management controls them since all management actions are based on scientific study of work tasks. (5) Taylor took for granted the degree of trust and mutual cooperation between management and employees. (6) This approach will eliminate the soldiering effect, thus increases the overall productivity of individuals resulting in more profits to the organization. (7) Employees will cooperate with management to advance the science; they will be trained on new methods and accept redesigned processes/tasks. For the opponents of Taylor s theory; they say (1) Taylor took the employee-employer trus for granted which never existed when it mattered hindering any financial incentive schemes to be ineffective because employees thought that the management was attempting to pin them down, and to management s feelings that the workers had succeeded in pulling the wool over their eyes (Cole and Kelly, 2016, pp. 28), (2) and that this approach based on low education level of workers back at Taylor s time- converted the workers to automatons leaving no room for workers to innovate; a perfect case for frustration and job dissatisfaction for a professional worker. (3) Taylor regarded the rewarding system relating to employee motivation- to be only as monetary incentives. (4) Work break down into smaller simpler tasks may result in employee dissatisfaction or to be deskilled- a debatable point that Taylor argues that it will increase the task efficiency by repetitively doing the same task. 3.3. Comparing Fayol s & Taylor s Theories Comparing the shared ideas as well as the differences of both theories will enlighten our understanding of them. 3.3.1. Ideas Uniting Both Theories Pryor and Taneja summarize those ideas in four points as follows (2010, pp.495-496) (1) Work processes, organizational structures, and an emphasis on a hierarchical division of labor. (2) Creation of the concept of the organization as a whole (Fayol delineated clear lines of authority into a conceptual and functional unity, and similarly Taylor emphasized formalization of work processes into a total organization). (3) Emphasis on formal rationality by supporting scientific techniques, order, and efficiency. (4) The role of managers

is to work with and encourage their workers. Taylor (1947) indicated that managers should work along with the workers, helping, encouraging, and smoothing the way for them. However, he also sought to change their mental attitudes and behaviors on the basis of scientific principles so as to improve operational efficiency. Along this same line, Fayol (1949) noted that managers need to determine their workers abilities, encourage and train them, and reward enthusiasm, initiative and success. (Pryor and Taneja, 2010, pp.495). 3.3.2. Differences between Both Theories (1) Brunsson (2008), states that Taylor s theory is contingent, bottom up view of organization while Fayol s is top-down perspective, (2) Taylor s contingent notion of management describes managerial practice more accurately than Fayol, (3) Taylor believed that managers and workers should specialize, but he expected the management activities to vary depending on the types of production and the specific organization. On the other hand, Fayol s concept of general management specifically defines the activities of managers as cited by Pryor and Taneja (2010, pp.496). 4. Review of Human-Relations Theories After World War I and Proceeding from the draw backs of the classical/scientific theories of management; (1) neglecting well-being of workers, (2) financial reward (e.g. salaries and wages) is the only motivator for employees to exert effort, another group of theorists (a.k.a. Human-Relations theorists) started to understand why classical/scientific management failed to deliver its promises (increase the worker productivity) operating under efficient control -face of management- only. They relayed this to the other management face (leadership motivation & coaching feature). They examined factors and conditions that motivated workers which revealed the significance of human and social factors -people feelings, needs, perceptions, attitudes, and relationships- in the workplace (Safferstone, 2005, pp.5-6). Some theorists aimed to discover what drives and sustains human behavior focusing on the effects of supervision, incentives and working conditions (Content theories of motivation- What motivates people? ) like Mary Follet, Elton Mayo, McGregor, Herzberg, Likert, Argyris and McClelland. Other focused on the processes of motivation and what people think when they decide whether or not to place effort in a particular activity How motivation occurs? (Cole and Kelly, 2016, pp.56) and their theories are labeled as the Process theory of motivation. Among the latter group one can identify the following contributors. (1) Victor Vroom Expectancy theory where his theses is exerting effort alone doesn t always lead to effective performance and that individual behavior is formed by their subjective perception of the reality

not the object reality, asserting on individuals perception of the situation that is vital to his theory. He categorized rewards into two groups; Intrinsic and extrinsic once introducing the difference between value and valence of an individual satisfaction in his Force formula - driving force to instill effort, achieve a level of performance and obtain rewards at the end- as one of three other factors; instrumentality and expectancy. (2) As in the case of Expectancy Theory, John Stacey Adams Equity Theory focused on people s perceptions, in this case of the inputs and outcomes involved, indicated that people are not only interested in rewards, but also in the comparative nature of rewards (applies only for extrinsic rewards). This theory hypothesis that employees sense of equity (i.e. fairness) is applied to their subjective view of conditions and not necessarily to the objective situation and that part of the attractiveness (valence) of rewards in a work context is the extent to which they are seen as comparable with those available to the peer group (Cole and Kelly, 2016, pp.58-59). (3) Opposite to the mentioned ones; where a satisfactory outcome is the prime motivator, Edwin Locke introduced the Goal-Setting Theory suggesting that it is the goal itself that provides the driving force. (4) While previous theories link to human perception, Burrhus Skinner Reinforcement theory driven by how to control behavior- links to the learning theory and suggests that behavior is function of the consequences of rewards or punishments obtained from earlier behavior, which has the effect of reinforcing current actions either positively or negatively (Cole and Kelly, 2016, pp.60). (5) William Ouchi Theory Z was an attempt to adopt the Japanese practices in approaching motivation. It combined the style of scientific management along with behaviouralism. As a summary for Content Theories and Process Theories of motivation, Locke and Latham (2004) states that motivation affects not only the acquisition of employees skills and abilities but also their utilization (how and to what extent) of those skills and abilities, as cited by Cole and Kelly (2016, pp.61). 5. Contemporary Organization Example 5.1. Fast Food Chains It is very obvious to us the influence of Fayol s and Taylor s theory upon the way most of the fast food chains conduct their business these days. Our example is McDonald s which was founded initially as a barbecue restaurant in 1940 then transformed to a chain of fast food in 1955 (Wikipedia, 2016); were we examined their business code of conduct under their corporate governance standards (McDonald s, 2016a) and found them a typical example of Fayol s management principles application.

McDonald's (2016a, pp.10) under Management Commitment, Additional Responsibilities of Supervisory employees and Personal Accountability we can see Fayol s Division of work, Unity of command, Unity of Direction, Subordination of individual interests to the general interest and Discipline principles implemented; every employee does one job, and restaurant supervisors have the authority to give orders with discipline- and are responsible for the functioning of the restaurant with one objective which is present in their slogan, Our success depends on each of us accepting personal responsibility for doing the right thing (McDonald s, 2016a, pp.8). Restaurant Staff has one supervisor. Centralization of decision-making is obvious although not clearly stated. Under Employee Experience (McDonald s, 2016a, pp.19), rewards are for only employees who achieve standards; a view of Schein s Rational-economic of untrustworthy people model towards McDonald s employee addressing the self-needs in Maslow Hierarchy of needs Theory theory as a motivation. Scalar chain: employees know where they stand in the hierarchy of the organization, and it is obvious that the organogram structure is top-down in hierarchy as well as the chain of command. Under Safe Workplace (McDonald s, 2016a, pp.21), order is present; a safe workplace for employees. Under Respect and Dignity, Human Rights and Inclusion and Diversity (McDonald s, 2016a, pp.20-21), we can see how they applied Fayol s Equity principle. Under Protection Against Retaliation (McDonald s, 2016a, pp.19), we sense how they deal with Fayol s Stability of tenure of personnel and under Values & We believe in McDonalds system (McDonald s, 2016a, pp.5), we can see Fayol s Esprit de corps principle. Under Inclusion and Diversity (McDonald s, 2016a, pp.21), there is a vague relation to Fayol s Remuneration principle; which justifies the strike done by McDonald s employees at some point (Wikipedia, 2016) and asserts on the hypothesis of Equity Theory ; attractiveness (valence) of rewards in a work context is the extent to which they are seen as comparable with those available to the peer group (Cole and Kelly, 2016, pp.59). Although we didn t see any sign of Fayol s initiative principle implemented anywhere inside their reports, we did find a recent commitment towards motivating their employees by providing eligible ones with assistance in tuition costs of academic programs (extrinsic rewards) through their Archways to opportunities an academic program initiative which include giving fifty annual scholarships as well (McDonald s, 2016b), thus mixing between the use of both intrinsic and extrinsic rewards; we relate this practice to Maslow Hierarchy of needs (intrinsic reward to produce job satisfaction: self-actualizing) and McGregor theory Y which see people under the lens of Schein Rational-economic of trustworthy people. A motivation that matches the needs of such type of employees (high school age range) hired by McDonalds in their home land (U.S.A). It is worth mentioning that all four principles of Taylor s scientific management do exist at the core of the fast food chains, as they (1) separated planning from the actual work, (2) every

task has a specific time and skill requirement, and (3) they replaced the rule-of-thumb in preparing their food; any McDonalds restaurant will serve that same hamburger sandwich each time you order it approximately in the same time period with the same ingredients and taste. McDonald s fast food chain has been able to show a unique value through their implementation of efficient and effective blind of strategies (practices and policies) influenced by classical and human-relations theories. 6. Conclusion Despite that classical and human-relations theory are becoming obsolescent our examination to a contemporary organizations like McDonalds displayed their great relevance to today s business operations. Our evaluation to the influence of classical and human-relations theory on today s management is that they are deeply rooted inside modern management styles. 7. Appendix (a) As published by Insightsquared, Effective (adj.) is the adequateness to accomplish a purpose; producing the intended or expected result. Efficient (adj.) is Performing or functioning in the best possible manner with the least waste of time and effort. (Insightsquared, 2013)

Insightsquared illustrates the impacts of both factors on organization performance (desired output & Value) via a 2x2 grid chart which is depicted here in Figure (1). As a summary to this point, being efficient is to do things right and being effective is to pursuit the right goals- Value Fig. (1) (Insightsquared, 2013). 8. References Cole, G. and Kelly, P. (2016) Management theory and Practice. UNICAF edn. Hampshire: Cengage Learning EMEA Insightsquared (2013) The Difference Between Effectiveness And Efficiency Explained. Available at: http://www.insightsquared.com/2013/08/effectiveness-vs-efficiency-whats-the-difference/ (Accessed: 10 October 2016) Karlof, B. and Loevingsson, F. (2005) A to Z of Management Concepts & Models. London: Thorogood Publishing Ltd. McDonalds (2016a) Standard of Business Conduct. Available at: http://corporate.mcdonalds.com/content/dam/aboutmcdonalds/investors/standards_of_conduct/us_english_1 4356_SBC_May%202016.pdf (Accessed 20 October 2016).

McDonalds (2016b) Employee Training and Education. Available at: https://www.mcdonalds.com/us/enus/careers/training-and-education.html (Accessed 20 October 2016). Pryor, M. and Taneja, S. (2010) 'Henri Fayol, practitioner and theoretician revered and reviled'. Journal of Management History, 16(4), pp. 489-503. Emerald [online]. Available at: http://www.emeraldinsight.com/doi/pdfplus/10.1108/17511341011073960 (accessed: 10 October 2016) Safferstone, M. (2005) Organizational Leadership: Classic Works and Contemporary Perspectives, Choice, 42(6), pp. 959-975. ProQuest [Online]. Available at: http://search.proquest.com.ergo.southwales.ac.uk/docview/225789200/fulltext/8f0813679eec49f8pq/4?acco untid=15324 (accessed: 15 October 2016) Taylor, F. (1919) The Principles of Scientific Management. Archive [Online]. Available at: https://ia800205.us.archive.org/23/items/cu31924085713331/cu31924085713331.pdf (accessed: 10 October 2016) Wikipedia (2016) McDonald s. Available at: https://en.wikipedia.org/wiki/mcdonald%27s#wages (Accessed 20 December 2016).