Business Administration: Concepts and History

Business Administration: Introduction and History

• Firms are complex, open systems interacting with their environment.
• Business administration has disciplines (engineering, mathematics, economics, sociology, psychology, law) and functional areas (operations, marketing, human resource management, accounting/finance, innovation).
• The business in context model has strategic, organizational, and environmental levels.

Brief History of Business Development

• Historically, most people lived and worked in rural areas.
• The Industrial Revolution brought massive production growth, leading to urbanization and factory work.
• This shift led to new management approaches: bureaucratic, scientific, human relations, and systems/network theories.

Bureaucratic Management (Max Weber)

• Weber analyzed societal changes due to the Industrial Revolution.
• Traditional authority (based on kinship, tradition) persisted, but Weber critiqued its limitations (particularism/favoritism).
• Bureaucratic management emphasizes rationality, formal rules, hierarchy, position-based authority, division of labor, merit-based pay/promotion, and separation of work and personal life.
• Critics point to inflexibility of rules, red tape, and potential for masked particularism.

Scientific Management (Frederick Taylor)

• Taylor, a pioneer management consultant, focused on increasing efficiency by analyzing actual production methods.
• His work assumed "Homo Economicus" (rational, wealth-motivated worker).
• Scientific management features standardization, specialization (of workers and managers), output-linked pay, planning and procedures, implementation via a management hierarchy.
• Increased productivity through methods of dividing work, studying skilled workers, using stopwatches to time tasks and recording movements, and selecting the fastest methods identified.

Human Relations (Elton Mayo)

• Mayo critiqued the dehumanizing aspects of Taylor's approach.
• Mayo's experiments showed an unexpected increase in worker productivity regardless of lighting conditions – a phenomenon later termed the Hawthorne effect (observed productivity increase influenced by observation itself).
• Social relations and participation drive worker motivation, contrasting the "Homo Economicus" assumption.
• Organizations are social systems, with informal leadership and group dynamics influencing productivity.

Systems Theory (Katz and Kahn)

• Katz and Kahn viewed organizations as open systems needing adaptation.
• Key principles: permeability (information flow), holism (the whole is greater than the sum of the parts), entropy (maintaining balance), and equifinality (multiple approaches to desired outcomes).

Network Theory (Granovetter and Burt)

• Organizations are networks rather than pyramids.
• Trust and culture, not rigid procedures, sustain networks.
• Networks facilitate innovation, responsiveness, and flexibility in a dynamic environment.
• Network properties are contrasted to pyramidal properties.