Chapter 2 Management PDF

anagement practices” are con-sidered a primary means for an organization to achieve its goals. Early in history, some of those goals were about increased secu-rity by having a well prepared and managed military, or increased prosperity by having effective and efficient means of trade and production....

anagement practices” are con-sidered a primary means for an organization to achieve its goals. Early in history, some of those goals were about increased secu-rity by having a well prepared and managed military, or increased prosperity by having effective and efficient means of trade and production. As the “four fac-ets” (economic, social, political, and technological) changed, the approaches used by people striving to achieve goals also changed. This required new and better management practices. In early business history there is no reference to the title “manager”. In order to address the changing opportunities and challenges, people drew upon their resources, skills, values, knowledge, influence, and technologies to achieve goals, much as managers do today. While it may not have been identified as such, those people were practicing “Management”! Controversy does surround the study of the history of management, but what is generally accepted to be true is that management practices have evolved (or at least changed) as a result of managers facing changes in the four facets. These changes necessitated new approaches to managing, and those approaches were less inspired by analysis of the distant past, than by the need to develop new ways to deal with an uncertain future. Management is about finding solutions to today’s problems under today’s circumstances and the only constant is...those circumstances are continu-ously changing! Putting aside the criticisms for a moment, if we are to study the Evolution of Management, what approaches should be used? Some of the ways to view the his-tory of a subject like management are described by Daniel Wren: LG 2-2 1. Study the “stages” or time periods and describe what the prevalent manage-ment practices were during those periods, for example, the pre and post industrialist era 2. Study the “schools of thoughts” which is to look at various categories or per-spectives on management such as the scientific approach, human behavior approach, decision theory, social systems in organizations, and so forth and consider how and why these have changed over time. 3. Study the “institutions” that were being run by managers by looking at various organizations at various points in time and analyze the life cycles those orga-nizations experienced. For example, review management practices at organi-zations like general Motors or DuPont or more recently at Facebook, google, and Apple. 4. Study the “biographies” of successful managers and the contributions of man-agement theorists such as, Jack Welch (former CEo of general Electric), Alfred Sloan (former CEo of general Motors), and Peter Drucker (frequent writer and speaker on management topics) or more recently, Michael Porter (Harvard professor who wrote seminal books on strategy). As described in Chapter 1, there is a “tension” that exists among various “experts” in management because of the inability to empirically prove or disprove various management theories, philosophies, ideologies, or whatever label may fit the per-spectives on the subject that are put forth by practitioners, consultants, academics, and others. You, as a student of Management, need to understand that very few aspects of management theory are developed from scientifically based research. This is because researchers cannot create the numerous experimental controls required to allow them to draw universally applicable conclusions. Consequently, the use of these studies to address common management challenges is limited. It is virtually impossible to run experiments under all the possible conditions that man-agers face in order to arrive at clear and predictable cause and effect relationships (in other words, to tell you with some certainty that if you use this management practice, you will get this resu Studying the Evolution of Management can help us to answer the following questions: Have management practices changed significantly over time and if so, why and how? Was the practice of management in the past done essentially the same way across different organizations, or were there significant variations in management practices across organizations? Do the four facets primarily determine what management practices are used at any point in time or is it possible that the management practices used during a particular period of time actually influenced some of the four facets? Do we see managers over time continuously trying to get the “Right Work, Done Well!” or is this more of a recent phenomenon? let’s briefly expand on each of these questions: Have management practices changed significantly over time and if so, why and how? one reason to study this historical evolution is to observe one of the more impor-tant premises the critics have put forth - that management practices are constantly changing due to changes in the four facets. In observing and understanding this evolution, managers gain a valuable insight: The importance of recognizing and adapting to change. Was the practice of management in the past done essentially the same way across different organizations, or were there significant variations in management prac-tices across organizations? In looking at the past, we can examine whether management practices at any point in time, or in any organization, have been universal, or instead, have varied across organizations, managers, theorists, and consultants. The fact that managers used different approaches does not necessarily mean that they did not understand the facets in the same way; it could mean instead that their industry, or the resources available to them, required a different approach to achieve their goal Do the four facets primarily determine what management practices are used at any point in time or is it possible that the management practices used during a particular period of time actually influenced some of the four facets? The ability to predict changes in the four facets would, if you accept the premise of the critics, require knowing what those changes will be, but this premise assumes one-way causality (that changes in the facets is what causes changes in manage-ment practices). It ignores the possibility that the “management practices” them-selves may influence, in a significant way, how the facets change. Instead, what may exist is a dynamic interaction between the facets, and managers actions/influence. Further, it may be that even knowing what the changes to these facets will be, may not be enough to predict how managers will adapt to address those changes. As mentioned previously, it would be unlikely, for good reasons, that all managers would react in the same way. Do we see managers over time continuously trying to get the “Right Work, Done Well!” or is this more of a recent phenomenon? Finally, another important reason to review this history is to observe whether the sin-gular focus of management during these different periods was to get the “Right Work, Done Well!” Managers views of what the “Right Work” is has changed and evolved over time. Their views of how to get that work “Done Well” also changed and evolved. observing how managers described the “Right Work” and how they attempted to get it “Done Well” is another beneficial aspect of studying the Evolution of Management. So, given this background, how do historians decide which management practices to document and which to ignore? Management practices are not easily observed or freely made available to researchers so there is no way to know that the inven-tory of practices viewed by historians at any point in time is comprehensive or even representative of common practices. We may merely be describing the practices of those managers and thought leaders who were the most outspoken or who were the most popular based on where they worked and how successful their organiza-tions were or were not. Therefore, in summary, a study of management history should not imply there was a singularity of approach by managers at various points in time. nor should it assume that what successful businesses did in the past was evidence of the use of “good management practices” in the absence of any practical, scientific way to dem-onstrate that correlation. Finally, it should not assume that most “good management practices” used in the past would be visible or accurately identifiable to historians. It is important to recognize these limitations when looking at historical accounts. Conclusion: You should view the History of Management with a necessary “grain of salt”. The focus of this chapter is to describe the evolution of some categories of manage-ment thought that are still influential today and to identify some of the individuals who were instrumental in “popularizing” those categories over time. (Essentially, using the second and fourth approach to historical research described by Wren earlier in this Topic). It does not suggest that the majority of organizations used these approaches or that these approaches were necessarily effective forms of management. They each have their limitations which may be part of the reason they each evolved. It may also help explain why multiple perspectives of management practice continue to coexist today without any single view necessarily being adopted by all managers. To go much beyond a brief overview of these approaches would require several chapters or even books to adequately explain and do justice to all the events, indi-viduals, and organizations that have contributed to the Evolution of Management. Such books do exist for those interested in a more in-depth review. We will opt for a much more condensed view in the next Topic 2.2! While adoption of some form of manage-ment practices was necessary for run-ning large governments and militaries for centuries, the need for management practices in business did not emerge, to any large extent, until the advent of the industrial revolution in the 1800s. The impetus for this revolution was finding ways to automate tasks that were tra-ditionally done by hand. Automation allowed for increases in production to make goods more readily available to more users, and enabled economies of scale which helped to reduce unit costs. In its earliest form, ideas for automation led to the invention of the printing press (1400s), textile automation (early 1700s), and the steam engine (later 1700s). Important to the advancement of the industrial revolu-tion were breakthroughs in communication, transportation, and energy. Without the means to communicate to a larger market, to transport goods to those markets, and to power the factories, the ability to create large-scale, automated production facilities would not have been poss Major industries in the United States such as the Bell Telephone companies, rail-roads, and the oil and coal energy producers, started emerging in the late 1800s along with large production companies in industries such as steel, machinery, chem-icals, textiles, and food processing. These large businesses had many customers, suppliers, and employees all of which created increased levels of complexity and consequently, there was a critical need to develop effective ways to “manage” these organizations to assure ongoing success. In this Topic, we will review the categories of management practices that were adopted by some of these large enterprises. We will see how these categories evolved over time, and why many of them are still part of modern management practices today. 2.2.2 – Specialization of Labor: The concept of having a person focus on a single component of the overall production of goods was first identified by Adam Smith in the late 1700s as a means for individuals to become more effective and efficient pro-ducers of those components. Rather than a farmer raising sheep, shearing wool, spinning it into thread, weaving it into material, cutting material into pieces, and sewing the pieces together to make a coat – the idea was that various individuals would specialize in each of these tasks. This concept carried over into the design of work in factories with laborers being assigned to perform specific tasks in the production processes. Today, specialization of labor is common in the manufacturing and service indus-tries. For example, in typical accounting departments in large companies there are tax specialists, cost accountants, financial reporting specialists, and so on rather than several accountants who each perform all these task In the early days of the industrial rev-olution the major sources of ideas on how to run these large businesses came from engineers and econo-mists. The engineers focused on how to set up and run the machines in the factories in an orderly man-ner and what types of machines were necessary to perform the vari-ous tasks. Economists focused on the financial aspects of running the factories including routinely keeping track of costs, setting pay policies for labor-ers, and determining prices. The limitation on Specialization of labor was that it did not address the critical need to coordinate tasks across individuals in order for the collective activities to work smoothly and efficiently. The “systems” approach improved the coordination of various activities across the business. Today, industrial engineers continue to play a key role in factories doing similar work as engineers did in those early days, however, the engineering work today is more specialized: for example, mechanical engineers focus on machinery design, industrial design engineers focus on plant layouts, and packaging engineers focus on designing packages and packaging systems for products, with other engineering specialists involved in other aspects of the business. Similarly, much of the work pre-viously done by economists is now done by others, e.g., accountants (keeping track of costs), human resource specialists (setting pay policies for labor), and marketing rofessionals (determining prices). While systematic management practices con-tinue to be used today to help coordinate these activities, these examples also dem-onstrate the continued use of “Specialization of labor”. 2.2.4 – Scientific Management: As businesses became larger, the own-ers sought ways to increase the pro-ductivity of workers. The prevailing view in the early factories was that workers generally did their jobs as they were told and there was no incentive for them to improve their own produc-tivity. (Some economists at that time encouraged the use of incentive sys-tems to increase productivity, however, laborers were suspicious of such incen-tive schemes and thus this approach was generally ineffective). In fact, the prevailing view of labor at the time was that it was not in their interest to be more productive as they could lose their job as less work-ers were needed and/or they could be paid less for doing more work. nonetheless, the underlying benefit of achieving gains in productivity gave rise to management consul-tants who had developed effective productivity improvement methods. one such consultant to businesses during the late 1800s and early 1900s was Frederick Taylor. Taylor believed that a detailed study of the worker doing his/her job and carefully recording the actions and time spent doing each sub-task, would make it possible to identify opportunities to redesign the way those tasks were done to greatly reduce the overall time spent to complete a task and thus significantly increase the output per hour worked. Taylor went beyond simply considering the time it took for each step performed by the worker, but he also examined how the worker’s interaction with machinery and the design of that machinery affected the time required to complete a task. Taylor also believed it was important to incentivize the worker to achieve a cer-tain “standard” of performance and that the worker’s pay should be directly related to how well they achieved, or failed to achieve, that “standard” on a daily basis. He believed the “standard” should be set based on what was reasonably possible, rather than what had been the historical rate of productivity. While he was generally supportive of the “union” movement in large manufacturing operations to improve working conditions and hours worked, he did not support the union concept of having all workers in a given class receive the same wage. He saw this as discourag-ing individual recognition of those workers who were more productive than others. During the same time period as Taylor lived two other influential thought lead-ers in management theory, a married couple named Frank and lillian gilbreth. Frank gilbreth is known for doing motion studies (observing the motions a worker makes to perform a job). Based on an early job he had as a bricklayer, through detailed analysis of the motions involved, he reduced the number of motions nec-essary to lay a brick from 18 to 6 and in so doing increased the number of bricks that could be laid in one hour from 175 to 350. later, as a business-man in the construction industry, he applied his model to several activities involved in construction and with the help of his wife “lillie”, published sev-eral books describing these improved work models. lillie gilbreth earned a Ph.D. in industrial psychology and her Ph.D. thesis was writ-ten on the topic “The Psychology of Man-agement” and submitted in 1912. Following Frank’s sudden death in 1924, lillie carried on their collective work for another 30+ years, later becoming a professor at Purdue School of Mechanical Engineering, the first woman to hold such an appointment. overcoming the challenges of being a woman in a “man’s field”, her many contributions to the study of management ultimately earned her the title, “The First lady of Management”! The use of quantitative methods contin-ued to be used as a major tool in managing production operations efficiently through the mid-1900s. Henry gantt had intro-duced the concept of graphically illustrating elapsed time in performing various tasks in a process and this was later enhanced with the use of computers to cre-ate more sophisticated scheduling systems in an emerging field know as operations research (oR). Terms such as Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT) were more advanced forms of gantt’s early work. The military also used these techniques as well as a growing number of management consultants who were helping businesses optimize their production performance. Interestingly, the next advances in the use of quantitative methods, though origi-nally developed in the United States, did not rise to prominence until they were successfully adopted by several Japanese businesses following World War II. As part of the post war reformation, the United States sent manufacturing experts to Japan to train Japanese business leaders on modern production methods. Following these initial seminars, W. Edwards Deming, a noted expert in statistical methods spent the next three decades lecturing and consulting in Japan on statistical quality control. Along with another U.S. expert, Joseph Juran, and a professor of Engineering from the University of Tokyo, Kaoru Ishikawa, these three thought leaders had a major impact on the development of advanced manufacturing methods in Japan leading to high quality production and the significant reduction of “defects”. At Toyota, Taiichi ohno developed the Toyota Produc-tion System which today is referred to as the “lean manu-facturing” system. Ironically, he attributed the idea to his study of Ford Motor Company’s man-ufacturing processes. Part of his model was the Just-in-Time (JIT) concept of inventory planning where parts are delivered at the time they are needed thus elimi-nating large stock piles of inventory. By the late 1980s, U.S. businesses routinely were visiting Japan to learn about their legendary high quality and efficient produc-tion methods; the exact methods that quality-oriented thought leaders from the U.S. had originally inspired! In summary, Taylor’s concept of eliminating “wasted time” in performing a task, and the gilbreth’s work in eliminating “wasted motion”, is at the root of current day “lean” manufacturing practices. These practices have been widely adopted to remove “waste” from supply chains in order to improve quality and reduce costs. later, the introduction of advanced statistical methods into production planning and process control in the 1950s, laid the foundation for the use of computers to process large amounts of production data to create advanced scheduling and quality control systems. These sophisticated approaches continue to be widely used today. Today, similar quantitative methods are used extensively in other areas besides production, including financial service industries and marketing. “Big Data” is a term A second major contributor to Administrative Management is another European named Max Weber (pro-nounced “veeber”). His time period was similar to Fayol’s, spanning the late 1800s and early 1900s. He was born in Prus-sia and is best known for espousing the ideal of “bureaucracy” as the best form of governance for business. It is impor-tant to understand that his definition of bureaucracy is different than contempo-rary notions of the term (red tape and rule-encumbered inefficiency) but rather that organizations should be governed by bureaus which was a german term meaning “an office for collecting and supplying information”. The main tenets of his model include: Division of labor – labor is divided so that authority and responsibility are clearly defined Managerial hierarchy – offices and positions are organized in a hierarchy of authority Formal selection – all employees are selected on the basis of technical qualifications demonstrated by formal examination, education, or training. Career orientation –...employees are “career professionals,” i.e., they work for fixed salaries and pursue “careers” within their respective fields  Formal rules and other controls – all employees are subject to formal rules and other controls regarding the performance of their duties Impersonality – rules and other controls are impersonal and uniformly applied in all cases Unlike Fayol, Weber believed his tenets to be definitive and not flexible. They were not guides for managers but rather, specific doctrine to be followed rigorously in order for the organization to function effectively. Critics have argued that Weber’s tenets are not the best way to manage an organization – and clearly, when taken to an extreme, they could create an inflexible organizational model. With further reflection, however, some of the underlying value of these tenets are relevant today: e.g., clear roles and responsibilities for jobs, selecting workers based on qualifications, the concept of professions in business, the value of formal rules and ontrol systems to monitor performance, uniform and fair application of rules to all employees – each of these concepts are generally embraced by many organizations today, even if not in the dogmatic manner suggested by Weber. 2.2.6 – Human Relations Management: It would be an oversimplification to suggest that Scientific and Administrative Management models had no consideration of the human aspect of work. Taylor advocated strongly that workers should share in the benefits from the improve-ments in their productivity. The gilbreths, and in particular lillian in her later work, were strong advocates of helping workers to develop their greatest potential in order to earn the highest wage, doing the work they were good at and enjoyed. nonetheless, In the early 1900s many large corporations including H.J. Heinz, International Harvester, and Westinghouse Electric created employee welfare departments. These welfare programs were initially designed to counter the grow-ing power of unions in manufacturing organizations by offering employees a more caring and positive work environment. The leaders of these departments, referred to as “welfare secretaries”, were often women with backgrounds in vocational guid-ance and social work. The “secretaries” handled employee grievances, operated medical dispensaries, oversaw recreational activities, employee education pro-grams, dining facilities, and even watched over the moral behavior of employees. In some cases, this oversight extended into employees’ personal lives which caused growing resentment by employees and by 1910 the trend was to replace “welfare secretaries” with “employment managers”. By 1920, at least 200 “personnel depart-ments” had been established in U.S. companies. nearly every company today has a human resources department. In the mid-1920s, a landmark set of studies would begin to change the historical perspective of workers’ inherent apathy towards participating in the improvement and productivity of their jobs. These studies took place at the Hawthorne Works of the Western Electric Company in Illinois, a facility that employed 40,000 work-ers, 6 days a week, in nearly every trade and profession. Western Electric made the essential components for telephones and switchboards. The initial study was a joint effort of general Electric and the Massachusetts Institute of Technology (MIT) to determine the effect of illumination (lighting levels) on the productivity of work-ers. There was a belief that better illuminated factories would result in increased productivity. To the surprise of the researchers, productivity increased regardless of direction of changes in illumination (increase oR decrease). Fascinated by the results, the researchers suggested continuing with additional studies in an attempt to find out why productivity increased regardless of the change in illumination.  was suspected that there was an underlying psychological motive that explained the workers’ increased performance. To further explore the psychological theory, a Harvard professor, Elton Mayo, was brought in to design a series of interviews of employees. He believed for the interviews to be fruitful, a more friendly supervisory interaction was necessary to reduce the employees “apprehension of authority”. The interviews revealed that employees who had been involved in the initial studies had actually become per-sonal friends both on and off the job and this esprit de corps was associated with a friendlier supervisory style. This presumed link between supervision, group spirit, and productivity was the foundation of the “human relations movement”. In addi-tion, as employees began to share complaints and compliments about their work-ing conditions, pay, and other issues, researchers found that most complaints could largely be attributable to adverse situations in the employees “personal lives” that manifested themselves in non-factual negative observations about their work. on the other hand, comments from employees about how pay and working conditions were better were not fact-based either, as there had been no changes in the pay scales or working environment over the several year period of conducting the inter-views. These positive comments were largely attributable to workers being happier with their relationships with their co-workers and supervisors. The results of the interviews led to a large-scale training program to teach supervisors to listen and understand employees’ personal concerns. The conclusions in the final report on the Hawthorne studies indicated that man-agers needed a second set of skills in addition to understanding the means to getting work done efficiently. These other skills included the ability to understand human behavior, and interpersonal skills in counseling, motivating, leading, and commu-nicating with employees. While Mayo was not involved in collecting the data and writing the final report, he was the most active in interpreting the results along with positing other theories on worker behavior and this why he is largely associated with the project. At the same time, some critics argued that the Hawthorne stud-ies were flawed because of the fact that the subjects were aware they were being studied and this influenced the results (the change in the behavior of subjects due to their awareness of being studied became known as the “Hawthorne Effect”). This claim was refuted by later interviews with participants who stated that they became oblivious to having an observer in the room after a while. In the early 1900s another key figure, Mary P. Follett, became a recognized voice on the topics of organization authority, responsibility, and power. Her views contra-dicted traditional perspectives that authority and control are hierarchical. In con-trast, she argued that the organization was the means of control through creation of a shared sense of responsibility for the desired outcomes. Therefore, the role of the leader was to define the purpose of the organization and help followers to embrace it as the collective common purpose. Thus, employees were not there to serve the interests of the leader, but to serve the interests of the common goal shared by leaders and employees alike By doing this, leaders create group power directed at achievement of shared goals which is stronger and more effective than leader power. Her view was that “moral leadership would enhance the effectiveness of organizations and the well-being of society”. In the mid-1930s government initiatives in support of organized labor such as the national labor Relations Act along with the for-mation of the Congress of Indus-trial organizations (CIo) enhanced labor’s collective bargaining power. These legal reforms were intended to strike a better balance between the power of organizations and the power of the individual worker. By the 1940s, various individuals were influential in putting forth theories regard-ing human behavior and its relevance to the workplace. For example, Abraham Maslow described his hierarchy of human needs as individuals seek to “self-actual-ize”. He believed that the best managers are ones that are “psychologically healthy” and had reached their point of self-actualization. Another outcome of this increased focus on human relations was a reconsidera-tion of the “Specialization of labor” concept discussed in section 2.2.2 of this topic. Adam Smith accurately predicted the risk that labor would become disenchanted with the repetitiveness of doing the same job over and over again. “Job Enlarge-ment” or the combining of multiple tasks became an attempt to make jobs more interesting. IBM, in particular, had success with implementing this approach in one of its major manufacturing facilities in new York State. A third change during this period was the increased involvement of employees in decision-making. The concept of decentralizing power and creating “flatter” organizations (fewer layers of management) was adopted by companies such as Sears, Roebuck and Company, a highly respected and successful retailer during the mid-1900s. other theories questioned the view of the manager as a rational actor who uses data and analysis to make optimal decisions. Herbert Simon, a Carnegie Mellon University professor, proposed the theory of “bounded rationality” suggesting that managers have limited capacity to process all the information and to do all the anal-ysis necessary to make the “perfect” decision. Further, he suggested that managers are subject to the biases and emotions that affect most people. Simon contended that, combined with the uncertainty of future events, it is not humanly possible to make “perfect” decisions. Instead, managers reduce the complexity they confront by constructing a simplified model for making decisions using the information and analytical tools they are comfortable with, resulting in considering only a limited number of options and only a limited number of potential consequences. Instead of striving for perfection in decisions, Simon concluded that managers often seek “satisfactory” solutions even though they recognize they may be overlooking better options or significant consequences if they invested more time and effort. Following on this pioneering work in human relations management were two streams of activity during the period 1930 – 1950. The “Micro” view focused on behavioral research on topics including group dynamics, decision-making, lead-ership, and motivation. The “Macro” view attempted to explain the interactions between the formal and informal processes operating within an organization. These two activities ultimately evolved into two major fields of study in manage-ment: organization Behavior and organization Theory. Entire college courses are dedicated to exploring the evolution of theories and research in these fields and the development and advancement of those theories is beyond the scope of this introductory textbook. We will address some of the current application of these concepts to modern management practices in later chapters. The tension between the Scientific view and the Human Relations view of man-agement was inevitable. At the core of the scientific view was a focus on optimizing efficiency, and when taken to the extreme, it sought cost savings without regard for the impact on the individual worker. At the core of the Human Relations movement was the recognition of the individual’s need to belong to a group and to share soli-darity with that group in pursuit of a meaningful purpose with fair treatment for all group members. At its extreme application, the profitability of the organization was secondary to the organization’s primary responsibilities to the worker and society in general. This tension in the workplace was not dissimilar to the larger ongoing politi-cal debate at the time between advocates of capitalism and advocates of socialism. The need to effectively embrace the valid claims of multiple stakeholders in a business (e.g., owners, employees, society in general) is a continuing challenge faced by many managers today. As we will see in later chapters, it does not require the manager to choose one of these theoretical perspectives over the other in order to balance these claims. Concluding Comments: This journey into the history of management has shown that the approaches man-agers used to run their organizations at various stages in history changed as technol-ogies advanced, labor/management relations evolved, the world endured turmoil, and new theories and practices emerged. While managers’ notions of what con-stituted the “Right Work” and what methods would assure getting it “Done Well” also evolved during these times, nonetheless the manager’s purpose remained the same: “Right Work, Done Well”! NOTE: Another entire chapter could be written on additional contemporary (post 1960’s) developments in management theories and practices. However, many of the current practices in management are based on these more recent developments and they will be included in the chapters that follow.