CHAPTER 2 THE EVOLUTION OF MANAGEMENT THOUGHT LEARNING OBJECTIVES To describe the evolution of management theory. To explain the principle of job specialization and division of labor. To identify the principles of administration & organization. To explain the contributions of management science. To explain how the external environment affects an organization. 2 1
1. Importance of Management Continuous need to find better methods to increase organizational performance. Economic, political and cultural forces have affected the development of these theories. The driving force behind the evolution of management theory is the search for better ways to utilize organizational resources in order to be more competitive. The accumulation of knowledge helps us proceed faster for better methods and for more satisfied employees and customers. As we said in Chapter 1 the better use of org. resources increases org. efficiency and effectiveness which in turn directly influence organizational performance. (Fig.2.1) Efficiency refers to the ability to make the best use of available resources to achieve goals. Effectiveness refers to the the ability to select the appropriate goals and achieve them. 3 The Evolution of Management 4 2
A. Scientific Management The evolution of modern management began after the industrial revolution in the closing decades of the 19 th century. Introduction of steam power and development of sophisticated machinery and equipment > weaving and clothing industries. Also, major economic, technical, and cultural changes were taking place at this time. - Adam Smith, the father of capitalism, after a lot of research came to the conclusion that increasing the level of job specialization increases efficiency and leads to higher organizational performance. Job specialization refers to the process which is characterized by a division of labor as workers specialize in different tasks over time. In other words, job specialization means that if a worker will specialize in only task from all the tasks that are needed to complete a job, then this will increase org. performance because each worker will become much more skilled at the specific task and therefore workers as a group under this method will produce a product faster. (Example: Chair assembly) 5 A. Scientific Management Frederick W. Taylor (1856-1915) Father of Scientific Management Taylor was best known for defining the techniques of scientific management. Taylor observed that employees were working at less than full capacity (sultry= meaningthatworkersdon tperformastheyshould)because(a)atthetimenotthe right wage systems were in place (b) managers did not study work scientifically and (c) employees were afraid of loosing their jobs due to productivity increase. Therefore, he believed that if the amount of time and effort that each worker expends to produce a unit of output can be reduced by increasing specialization and the division of labor, the production process will become more efficient. In other words,themostefficientdivisionof laborcouldbestbedeterminedbyscientific management techniques rather than intuitive or informal rule-of-thumb knowledge. His studies are known as Time and Motion studies. Through his studies he developed four major scientific principles: 1. Scientific study of the task at hand. 2. Proper selection and training of the workers. 3. Cooperation between workers and supervisors. 4. Proper division of work and responsibilities between management and workers. 6 3
A. Scientific Management Scientific Management refers to the systematic study of relationships between people and tasks in order to redesign the work process to increase efficiency. It focuses on scientific methods to achieve efficiency. Mgt Science Division i i of Work + Select Train Evaluate Scientifically 7 B. Administrative Management As we said in Chapter 1 Org. Structure is the system of task and authority relationships that control how employees use resources to achieve the organization s goals. Two of the most important administrative theories are Bureaucratic mgt and Fayol s principles of mgt: Administrative management refers to the study of how to create an organizational structure that targets high levels of efficiency and effectiveness. The of Bureaucracy, developed by Max Weber (1864-1920), is a formal system of organization and administration designed to ensure efficiency and effectiveness. Bureaucratic Mgt emphasizes the need for organizations to operate in a rational manner. The focus was on the right structure that clearly defines responsibilities and authority and states in written form rules and regulations. Webber (German sociologist) tried to suggest the ideal organization but when his ideas are carried to extremes they result in a lethargic organization with excessive paperwork (red tape). Authority is the power to hold people accountable for their actions and to make decisions concerning the use of organizational resources. Rules are formal written instructions that specify actions to be taken under various different circumstances to achieve specific goals. Standard Operating Procedures (SOPs) are specific sets of written instructions about how to perform a certain aspect of a job. Norms are unwritten, informal codes of conduct that prescribe how people should act in particular situations and are considered important by most members of a group or organization. 8 4
B. Administrative Management A bureaucratic system of administration is based on the principles shown on the following chart (Fig. 2.2) Principle 1: Formulation of line of authority into a hierarchical structure. A manager s formal authority derives from the position he or she holds in the organization. Principle 2: Authority can be exercised effectively in an organization when positions are arranged hierarchically so employees know whom to report to and who reports to them. Principle 3: Formulation of the process of career advancement to be based on merit. People should occupy positions because of their performance, not because of their social standing or personal contacts. Principle 4: Formulation of rules and processes. The extend of each position s formal authority and task responsibilities and its relationship to other positions in the organization should be clearly specified. Principle 5: Impersonality in the operation of rules and processes. Managers must create a well-defined system of rules, SOPs, and norms so that they can effectively control behavior within an organization. 9 Weber s Principles of Bureaucracy 10 Figure 2.2 5
B. Administrative Management H. Fayol (1841-1925) is known as the father of classical management or father of management thought. ht - Although these principles were developed at the turn of the 20 th century they still remain the foundation on which much of recent management theory and research are based. He developed the functional approach to management that is, the functions we talked about last time were firstly identified as Planning, Organizing, i Commanding, Coordinating, & Controlling. Henri Fayol identified 14 principles that he considered essential to increase the efficiency of the management process. These are: 11 Fayol s Principles of Management Division of Labor: allows for job specialization. jobs can have too much specialization leading to poor quality and worker dissatisfaction. Authority and Responsibility both formal and informal authority resulting from special expertise. Unity of Command Employees should have only one boss. Line of Authority A clear chain of command from top to bottom of the firm. Centralization The degree to which authority rests at the top of the organization. Unity of Direction A single plan of action to guide the organization. 12 6
Fayol s Principles of Management Equity The provision of justice and the fair and impartial treatment of all employees. Order The arrangement of employees where they will be of the most value to the organization and to provide career opportunities. Initiative The fostering of creativity and innovation by encouraging employees to act on their own. Discipline Obedient, applied, respectful employees are necessary for the organization to function. Remuneration of Personnel An equitable uniform payment system that motivates contributes to organizational success. Stability of Tenure of Personnel Long-term employment is important for the development of skills that improve the organization s performance. Subordination of Individual Interest to the Common Interest The interest of the organization takes precedence over that of the individual employee. Esprit de corps Comradeship, shared enthusiasm foster devotion to the common cause (organization). 13 C. Behavioral Management Behavioral Management refers to the study of how managers should behave to motivate employees and therefore, encourage them to perform at high levels and be committed to the achievement of organizational goals. Mary Parker Follett (1868-1933) authority should gowith knowledge whether it isup the line or down. Mary Parker Follett believed that management overlooked the many ways employees can contribute to the organization. Four major ideas: 1. Group functioning is extremely important (team work) 2. Create the principle of power with rather than the power over in management employee relations. 3. Integration unity meaning that the organization should operate as one functional whole with various interrelated parts working together effectively to achieve organizational goals. 4. It should be better to share communication between the two parties involved. In other words, she argued that employees should be involved in job analysis and managers should allow them to participate in the work development process. Managers should behave more as coaches and facilitators and not as supervisors. This shows that she anticipated the current interest in self-managed teams and empowerment. Overall managers should pay attention to people and not only focus on the best methods to do the work. 14 7
The Hawthorne Studies (Hawthorne Works, Western Electric Co., 1924-1932) Follett s work was not appreciated at the time, so researchers focused more on finding ways to improve various characteristics of the work setting such as job specialization. One such series of studies are the Hawthorne studies. 1 st Set of studies: It began as an attempt to investigate how characteristics of the work setting specifically the level of lighting or illumination- affect worker fatigue and performance. The researchers conducted an experiment in which they systematically y measured ed worker productivity poduct ty at various levels of illumination. They found that regardless of the level of light, productivity increased. It fell only when the level of light dropped at a point were workers could no longer see. No relationship exists between change in lighting conditions and employee productivity. 15 The Hawthorne Studies 2 nd Set of Studies: Subsequently, after a lot of research they found that workers productivity was improved because of the attention the workers got from the researchers will performing the experiment and because by being the subject of the study they were willing to cooperate to produce the results they believed researchers desired. This particular effect is now known as the Hawthorne effect. After this, many researchers turned their attention to managerial behavior and leadership. This means that if supervisors could be trained to behave in ways that would elicit cooperative behavior from their subordinates, then productivity could be increased. This led to the human relations movement. 3 rd Set of Studies: Tried to find principles rearding norms (values, self regulation, beliefs). The experiments continued and in another set conducted by Elton Mayo andf.j.roethlisbergerit was discovered that workers as a group had adopted on purpose an output restriction to protect their jobs. Thus, a work group s influence over output can be as great as the supervisors influence. This implication coming out of the Hawthorne studies points out that managers must understand the working of the informal organization. The Hawthorne studies showed the importance of understanding how the feelings, thoughts, and behavior of work group members and managers affect performance. This led to an increasing interest to the area of management known as organizational behavior. Overall the Hawthorne Studies determined the human relations view in management. 16 8
The Hawthorne Studies (Hawthorne Works, Western Electric Co., 1924-1932) The Hawthorne Effect suggests that a manager s behavior or leadership approach can affect workers level of performance. The human relations movement supports that supervisors must be behaviorally trained to manage employees in ways to extract their cooperation and increase their productivity. Informal organization refers to the system of behavioral rules and norms that arise in a group when management tries to manage or change behavior in organizations. Organizational behavior studies the factors that influence how individuals and groups respond to and act in organizations. 17 X and Y (by Douglas McGregor) Managerial belief about human nature After WW2 several studies examined how assumptions about workers attitudes and behavior affect managers behavior. The most influential approach was X and Y by D.M. He stated that two sets of assumptions about how work attitudes and behaviors affect how managers behave in organizations. These two opposite sets of assumptions are known as X and Y. (Fig 2.3) - X supports negative assumptions about workers that lead to the conclusion that a manager s job is to supervise them closely and control their behavior. - Y supports positive assumptions about workers that lead to the conclusion that a manager s task is to create a work setting that encourages commitment to organizational goals and provides opportunities for workers to be imaginative and to exercise initiative and self-direction. 18 9
X vs. Y 19 Figure 2.3 D. Management Science Management Science is a contemporary approach to management that uses quantitative techniques to help managers make maximum use of organizational resources. Management science is a contemporary extension of scientific management developed d by Taylor. IT plays an important role in management science since it is directly affecting the tools managers use to make decisions. It has the following branches: Quantitative management = uses mathematical techniques ex. How much inventory to hold Operations management = analyze organization s production and delivery systems to increase efficiency Total quality management (TQM) = analyzes an organization s input, processing, and output activities to increase product quality Management information systems (MIS) = design information systems to provide information (external and internal) which is vital for effective decision making. The right information, at the right time, to the right people All of these provide tools than managers can use to help improve the quality of their decision making and increase efficiency and effectiveness. 20 10
E. Organizational Environment Researchers went beyond examining how managers can influence behavior within organizations to consider how managers control the organization s relationship with its external environment or as it is called the organizational environment. Organizational environment refers to the set of forces and conditions that operate beyond an organization s boundaries but affect a manager s ability to acquire and utilize resources. The Open-Systems & The Contingency 21 The Open-Systems Developed by Daniel Katz, Robert Kahn, and James Thompson in the 1960s. In general, a system (Fig. 2.4,) is a set of interrelated parts working together for a common goal. Open system is a system which takes in resources from its external environment and transforms them into products that are sent back to the external environment for purchase by customers. Closed system is a system that is self-contained and is not affected by changes in its external environment. Organizations that operate as closed systems, that ignore the external environment, and that fail to acquire inputs are likely to experience entropy; Entropy refers to the tendency of a system to lose its ability to control itself and hence to dissolve and disintegrate. An organization should operate as an open system characterized by: a. Negative Entropy; bring in new ideas to deal with problems b. Differentiation; differentiate product from competition. c. Synergy; theperformance gains that result when individuals and departments cooperate & coordinate their actions. Also, managers should identify all the parts of a system (individuals, groups, units, external elements) and see how thy affect each other and work together to promote efficiency and effectiveness. System theorists argue that the whole is greater than the sum of its parts. Ifthisisachieveditwillleadto synergy; 22 11
Figure 2.4 The Organization as an Open System 23 Contingency (1960s) (Tom Burns & G.M. Stalker in Britain, Paul Lawrence & Jay Lorsch in U.S.A.) - There is no one best way to organize because not all situations managers face are the same and because of changes in the environment such as technological changes, entry of new competitors etc. - Researchers proposed two basic ways in which h managers can organize and control an organization s activities to respond to characteristics of its external environment: Contingency theory refers to the idea that the organizational structures and control systems managers choose, depend on (are contingent on) characteristics of the external environment in which the organization operates. Mechanistic structure is an organizational structure in which authority is centralized, tasks and rules are clearly specified, and employees are closely supervised. (based on X) Mechanistic structure (I.e. McDonald s) for a stable environment, lower costs, control over conversion, and most efficient production Organic structure is an organizational structure in which authority is decentralized to middle and first-line managers and tasks and roles are left ambiguous to encourage employees to cooperate and respond quickly to the unexpected. (based on Y) Organic structure for changing environments, looser control, managers react quicker to changes but more expensive, more time, money and effort spent on coordination. 24 12
Fig.2-5: Contingency of Organizational Design Figure 2.5 Review Questions 1. Define scientific management, administrative management and the theory of bureaucracy. 2. Define behavioural management and state the major conclusion of the Hawthorne Studies. 25 13