Evolution of Management Theory PDF

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SSecond Se eccoon nd dPPages aggeess a Second Pages The Evolution of APPENDIX A Management Theory Management theory concerning appropriate management practices has evolved in modern times. The so-called classical management theories emerged around the start of the twentieth century. These include scientific management, which focuses on matching people and tasks to maximize efficiency, and administrative management, which focuses on identifying the principles that will lead to the creation of the most efficient system of organization and management. Behavioural management theories, developed both before and after the Second World War, focus on how managers should lead and control their workforces to increase performance. Management sci- ence theory, developed during the Second World War, has become more important as researchers have developed rigorous analytical and quantitative techniques to help managers measure and control organizational performance. Finally, theories were developed during the 1960s and 1970s to help explain how the external environment affects the way organizations and managers operate. Scientific Management Theory The evolution of modern management began in the closing decades of the nine- teenth century, after the Industrial Revolution had swept through Europe, Canada, and the United States. Small workshops run by skilled workers who produced hand- manufactured products (a system called crafts-style production) were replaced by large factories. In these factories, hundreds or even thousands of unskilled or semi-skilled employees controlled the sophisticated machines that made products. See Figure A.1. Many of the managers and supervisors had only technical knowledge and were unprepared for the social problems that occur when people work together in large groups (as in a factory or shop system). Managers began to search for new ways to manage their organizations’ resources, and soon they began to focus on how to increase the efficiency of the employee–task mix. Job Specialization and the Division of Labour The famous Scottish economist Adam Smith was one of the first to look at the effects of different manufacturing systems.1 He compared the relative performances of two different manufacturing methods. The first was similar to crafts-style production, in which each employee was responsible for all of the 18 tasks involved in producing a The Adam Smith Institute pin. The other had each employee performing only one or a few of the 18 tasks that www.adamsmith.org go into making a completed pin. Smith found that factories in which employees specialized in only one or a few tasks had greater performance than factories in which each employee performed all 18 pin-making tasks. In fact, Smith found that 10 employees specializing in jon67431_Appendix A.indd 433 11/27/2009 9:11:28 AM  Second Pages 434 APPENDIX A FIGURE A.1 The Evolution of Management Theory Organizational Environment Theory Management Science Theory Behavioural Management Theory Administrative Management Theory Scientific Management Theory 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 a particular task could, between them, make 48 000 pins a day, whereas those employees who performed all the tasks could make only a few thousand at most.2 Smith reasoned that this difference in performance occurred because the employees who specialized became much more skilled at their specific tasks, and, as a group, were thus able to produce a product faster than the group of employees in which everyone had to perform many tasks. Smith concluded that increasing the level of job specialization job specialization—the process by which a division of labour occurs as different The process by which a employees specialize in different tasks over time—increases efficiency and leads to division of labour occurs as higher organizational performance.3 different employees specialize in different tasks over time. Based on Adam Smith’s observations, early management practitioners and theorists focused on how managers should organize and control the work process to maximize the advantages of job specialization and the division of labour. F.W. Taylor and Scientific Management scientific management Frederick W. Taylor (1856–1915) is best known for defining the techniques of scientific The systematic study of management, the systematic study of relationships between people and tasks for the relationships between people purpose of redesigning the work process to increase efficiency. Taylor believed that the and tasks for the purpose of redesigning the work process production process would become more efficient if the amount of time and effort that to increase efficiency. each employee spent to produce a unit of output (a finished good or service) could be reduced. He noted that increased specialization and the division of labour could increase efficiency. Taylor believed that the way to create the most efficient division of labour could best be determined by means of scientific management techniques rather than intuitive or informal rule-of-thumb knowledge. On the basis of his experiments The F.W. Taylor Project and observations as a manufacturing manager in a variety of settings, he developed four attila.stevens-tech. principles to increase efficiency in the workplace:4 edu/~rdowns/ Principle 1. Study the way workers perform their tasks, gather all the informal job knowledge that workers possess, and experiment with ways of improving the way tasks are performed. Principle 2. Codify the new methods of performing tasks into written rules and stan- dard operating procedures. Principle 3. Carefully select workers so that they possess skills and abilities that match the needs of the task, and train them to perform the task according to the established rules and procedures. Principle 4. Establish a fair or acceptable level of performance for a task, and then develop a pay system that provides a reward for performance above the acceptable level. jon67431_Appendix A.indd 434 11/27/2009 9:11:39 AM  Second Pages The Evolution of Management Theory 435 By 1910, Taylor’s system of scientific management had become known and, in many instances, faithfully and fully practised.5 However, managers in many organizations chose to use the new principles of scientific management selectively. This decision ultimately resulted in problems. For example, some managers using scientific man- agement saw increases in performance, but rather than sharing performance gains with employees through bonuses as Taylor had advocated, they simply increased the amount of work that each employee was expected to do. Thus, employees found they were required to do more work for the same pay. Employees also learned that increases in performance often resulted in layoffs because fewer employees were needed. In addi- tion, the specialized, simplified jobs were often monotonous and repetitive, and many employees became dissatisfied with their jobs. Scientific management brought many employees more hardship than gain and left them with a distrust of managers who did not seem to care about their well-being.6 These dissatisfied employees resisted attempts to use the new scientific management techniques and at times even withheld their job knowledge from managers to protect their jobs and pay. Taylor’s work has had an enduring effect on the management of production sys- tems. Managers in every organization, whether it produces goods or services, now carefully analyze the basic tasks that must be performed and try to create work systems that will allow their organizations to operate most efficiently. The Gilbreths Two prominent followers of Taylor were Frank Gilbreth (1868–1924) and Lillian Gilbreth (1878–1972), who refined Taylor’s analysis of work movements and made many contributions to time-and-motion study.7 Their aims were to (1) break up a particular task into individual actions and analyze each step needed to perform the The Gilbreth Network task, (2) find better ways to perform each step, and (3) reorganize each of the steps so gilbrethnetwork. tripod.com that the action as a whole could be performed more efficiently—at less cost in time and effort. The Gilbreths often filmed an employee performing a particular task and then separated the task actions, frame by frame, into their component movements. Their goal was to maximize the efficiency with which each individual task was performed so that gains across tasks would add up to enormous savings of time and effort. In workshops and factories, the work of the Gilbreths, Taylor, and many others had a major effect on the practice of management. In comparison with the old crafts-style system, jobs in the new system were more repetitive, boring, and monotonous as a result of the application of scientific management principles. Employees became more dissatisfied. Frequently, the management of work settings became a game between employees and managers: Managers tried to introduce work practices to increase per- formance, and employees tried to hide the true potential efficiency of the work setting in order to protect their own well-being.8 Administrative Management Theory Side by side with scientific managers studying the person–task mix to increase effi- ciency, other researchers were focusing on administrative management—the study administrative of creating an organizational structure that leads to high efficiency and effective- management ness. Organizational structure is the system of task and authority relationships that The study of how to create an organizational structure that control how employees use resources to achieve the organization’s goals. Two of leads to high efficiency and the most influential views regarding the creation of efficient systems of organiza- effectiveness. tional administration were developed in Europe. Max Weber, a German professor jon67431_Appendix A.indd 435 11/27/2009 9:11:39 AM  Second Pages 436 APPENDIX A of sociology, developed one theory. Henri Fayol, the French manager, developed the other. The Theory of Bureaucracy Max Weber (1864–1920) wrote his work at the start of the twentieth century, when Germany was undergoing its Industrial Revolution.9 To help Germany manage its growing industrial enterprises at a time when it was striving to become a world power, bureaucracy Weber developed the principles of bureaucracy—a formal system of organization and A formal system of administration designed to ensure efficiency and effectiveness. organization and administration designed Principle 1. In a bureaucracy, a manager’s formal authority derives from the position to ensure efficiency and he or she holds in the organization. effectiveness. In a bureaucratic system of administration, obedience is owed to a manager, not because of any personal qualities that he or she might possess—such as personality, wealth, or social status—but because the manager occupies a position that is associ- ated with a certain level of authority and responsibility.10 Principle 2. In a bureaucracy, people should occupy positions because of their perfor- mance, not because of their social standing or personal contacts. This principle was not always followed in Weber’s time and is often ignored today. Some organizations and industries are still affected by social networks in which personal contacts and relations, not job-related skills, influence hiring and promo- tional decisions. Principle 3. The extent of each position’s formal authority and task responsibilities, and its relationship to other positions in an organization, should be clearly specified. authority When the tasks and authority associated with various positions in the organization The power to hold people are clearly specified, managers and employees know what is expected of them and accountable for their actions what to expect from each other. Moreover, an organization can hold all its employ- and to make decisions concerning the use of ees strictly accountable for their actions when each person is completely familiar organizational resources. with his or her responsibilities. Principle 4. For authority to be exercised effectively in an organization, positions should be arranged hierarchically. This helps employees know whom to report to and who reports to them.11 Managers must create an organizational hierarchy of authority that makes it clear (a) who reports to whom and (b) to whom managers and employees should go rules if conflicts or problems arise. This principle is especially important in the Armed Formal written instructions Forces, Canadian Security Intelligence Service (CSIS), Royal Canadian Mounted that specify actions to be taken under different circumstances Police (RCMP), and other organizations that deal with sensitive issues where there to achieve specific goals. could be major repercussions. standard operating Principle 5. Managers must create a well-defined system of rules, standard operating procedures (SOPs) procedures (SOPs), and norms so that they can effectively control behaviour within an Specific sets of written organization. instructions about how to perform a certain aspect of Rules, SOPs, and norms provide behavioural guidelines that improve the perfor- a task. mance of a bureaucratic system because they specify the best ways to accomplish organizational tasks. Rules are formal written instructions that specify actions to be norms taken under different situations to achieve specific goals. SOPs are specific sets of Unwritten rules and informal codes of conduct that written instructions on how to perform a certain aspect of a task. Norms are unwrit- prescribe how people should ten rules and informal codes of conduct on how to act in particular situations. act in particular situations. Companies such as McDonald’s and Wal-Mart have developed extensive rules and jon67431_Appendix A.indd 436 11/27/2009 9:11:39 AM  Second Pages The Evolution of Management Theory 437 procedures to specify the types of behaviours that are required of their employees, such as, “Always greet the customer with a smile.” Weber believed that organizations that implement all five principles will establish a bureaucratic system that will improve organizational performance. The specifications of positions and the use of rules and SOPs to regulate how tasks are performed make it easier for managers to organize and control the work of subordinates. Similarly, fair and equitable selection and promotion systems improve managers’ feelings of secu- rity, reduce stress, and encourage organizational members to act ethically and further promote the interests of the organization.12 If bureaucracies are not managed well, however, many problems can result. Sometimes, managers allow rules and SOPs—“bureaucratic red tape”—to become so cumbersome that decision making becomes slow and inefficient and organizations are unable to change. When managers rely too much on rules to solve problems and not enough on their own skills and judgment, their behaviour becomes inflexible. A key challenge for managers is to use bureaucratic principles to benefit, rather than harm, an organization. Fayol’s Principles of Management Working at the same time as Weber but independently of him, Frenchman Henri Fayol (1841–1925), the CEO of Comambault Mining, identified 14 principles (sum- marized in Table A.1) that he believed to be essential to increasing the efficiency of the management process.13 Some of the principles that Fayol outlined have faded from contemporary management practices, but most have endured. The principles that Fayol and Weber set forth still provide a clear and appropriate set of guidelines that managers can use to create a work setting that makes efficient and effective use of organizational resources. These principles remain the foundation of modern management theory; recent researchers have refined or developed them to suit modern conditions. For example, Weber’s and Fayol’s concerns for equity and for establishing appropriate links between performance and reward are central themes in contemporary theories of motivation and leadership. TABLE A.1 Fayol’s 14 Principles of Management Division of Labour Job specialization and the division of labour should increase efficiency, especially if managers take steps to lessen employees’ boredom. Authority and Responsibility Managers have the right to give orders and the power to exhort subordinates for obedience. Unity of Command An employee should receive orders from only one superior. Line of Authority The length of the chain of command that extends from the top to the bottom of an organization should be limited. Centralization Authority should not be concentrated at the top of the chain of command. Unity of Direction The organization should have a single plan of action to guide managers and employees. Equity All organizational members are entitled to be treated with justice and respect. Order The arrangement of organizational positions should maximize organizational efficiency and provide employees with satisfying career opportunities. Initiative Managers should allow employees to be innovative and creative. Discipline Managers need to create a workforce that strives to achieve organizational goals. Remuneration of Personnel The system that managers use to reward employees should be equitable for both employees and the organization. Stability of Tenure of Personnel Long-term employees develop skills that can improve organizational efficiency. Subordination of Individual Interests to the Common Interest Employees should understand how their performance affects the performance of the whole organization. Esprit de Corps Managers should encourage the development of shared feelings of comradeship, enthusiasm, or devotion to a common cause. jon67431_Appendix A.indd 437 11/27/2009 9:11:39 AM  Second Pages 438 APPENDIX A Behavioural Management Theory behavioural management The behavioural management theorists writing in the first half of the twentieth The study of how managers century all chose a theme that focused on how managers should personally behave should behave in order to in order to motivate employees and encourage them to perform at high levels and be motivate employees and encourage them to perform at committed to the achievement of organizational goals. high levels and be committed to achieving organizational goals. The Work of Mary Parker Follett If F.W. Taylor is considered to be the father of management thought, Mary Parker Follett (1868–1933) serves as its mother.14 Much of her writing about management and about the way managers should behave toward employees was a response to her Mary Parker Follett concern that Taylor was ignoring the human side of organization. Follett also pro- Foundation posed that knowledge and expertise, and not managers’ formal authority deriving www.follettfoundation.org from their position in the hierarchy, should decide who would lead at any particular moment. She believed, as do many management theorists today, that power is fluid and should flow to the person who can best help the organization achieve its goals. Follett took a horizontal view of power and authority, in contrast to Fayol, who saw the formal line of authority and vertical chain of command as being most essential to effective management. Follett’s behavioural approach to management was radical for its time. The Hawthorne Studies and Human Relations Probably because of its radical nature, Follett’s work went unappreciated by manag- ers and researchers until quite recently. Instead, researchers continued to follow in the footsteps of Taylor and the Gilbreths. One focus was on how efficiency might Hawthorne Studies be increased through improving various characteristics of the work setting, such as www.wikipedia.org/wiki/ job specialization or the kinds of tools employees used. One series of studies was Hawthorne_studies conducted from 1924 to 1932 at the Hawthorne Works of the Western Electric Company.15 This research, now known as the Hawthorne studies, began as an attempt to investigate how characteristics of the work setting—specifically the level of light- ing or illumination—affect employee fatigue and performance. The researchers con- ducted an experiment in which they systematically measured employee productivity at various levels of illumination. One of the main implications of the Hawthorne studies was that the behaviour of managers and employees in the work setting is as important in explaining the level of performance as the technical aspects of the task. Managers must understand the informal organization workings of the informal organization, the system of behavioural rules and norms The system of behavioural that emerge in a group, when they try to manage or change behaviour in organiza- rules and norms that emerge tions. Many studies have found that as time passes, groups often develop elaborate in a group. procedures and norms that bond members together, allowing unified action either to cooperate with management in order to raise performance or to restrict output and undermine organizational goals.16 The Hawthorne studies demonstrated the impor- tance of understanding how the feelings, thoughts, and behaviour of work-group members and managers affect performance. It was becoming increasingly clear to researchers that understanding behaviour in organizations is a complex process that organizational behaviour is critical to increasing performance.17 Indeed, the increasing interest in the area of The study of the factors that have an impact on how management known as organizational behaviour—the study of the factors that have individuals and groups respond an impact on how individuals and groups respond to and act in organizations—dates to and act in organizations. from these early studies. jon67431_Appendix A.indd 438 11/27/2009 9:11:40 AM  Second Pages The Evolution of Management Theory 439 Theory X and Theory Y Several studies after the Second World War revealed how assumptions about employ- ees’ attitudes and behaviour affect managers’ behaviour. Perhaps the most influential Douglas McGregor approach was developed by Douglas McGregor. He proposed that two different sets of www.lib.uwo.ca/busines/ assumptions about work attitudes and behaviours dominate the way managers think dougmcgregor.html and affect how they behave in organizations. McGregor named these two contrasting sets of assumptions Theory X and Theory Y.18 According to the assumptions of Theory X, the average employee is lazy, dislikes Theory X work, and will try to do as little as possible. Moreover, employees have little ambition Negative assumptions about and wish to avoid responsibility. Thus, the manager’s task is to counteract employees’ employees that lead to the conclusion that a manager’s natural tendencies to avoid work. To keep employees’ performance at a high level, task is to supervise them the manager must supervise them closely and control their behaviour by means of closely and control their rewards and punishments. behaviour. Theory Y assumes that employees are not inherently lazy, do not naturally dis- Theory Y like work, and, if given the opportunity, will do what is good for the organization. Positive assumptions about According to Theory Y, the characteristics of the work setting determine whether employees that lead to the employees consider work to be a source of satisfaction or punishment; and managers conclusion that a manager’s do not need to control employees’ behaviour closely in order to make them perform task is to create a work setting at a high level because employees will exercise self-control when they are committed to that encourages commitment to organizational goals and organizational goals. It is the manager’s task to create a work setting that encourages provides opportunities for commitment to organizational goals and provides opportunities for employees to be imagination, initiative, and imaginative and to exercise initiative and self-direction. self-direction. Management Science Theory Management science theory is a contemporary approach to management that management science focuses on the use of rigorous quantitative techniques to help managers make theory maximum use of organizational resources to produce goods and services. In essence, An approach to management that uses rigorous quantitative management science theory is a contemporary extension of scientific management. techniques to help managers There are many branches of management science, each of which deals with a specific make full use of organizational set of concerns: resources. Quantitative management uses mathematical techniques—such as linear and non- linear programming, modelling, simulation, queuing theory, and chaos theory—to help managers decide, for example, how much inventory to hold at different times of the year, where to build a new factory, and how best to invest an organization’s financial capital. Operations management (or operations research) provides managers with a set of techniques that they can use to analyze any aspect of an organization’s production system to increase efficiency. Total quality management (TQM) focuses on analyzing an organization’s input, conversion, and output activities to increase product quality.19 Management information systems (MIS) help managers design information systems that provide information about events occurring inside the organization as well as in its external environment—information that is vital for effective decision making. All these subfields of management science provide tools and techniques that managers can use to help improve the quality of their decision making and increase efficiency and effectiveness. jon67431_Appendix A.indd 439 11/27/2009 9:11:40 AM  Second Pages 440 APPENDIX A Organizational Environment Theory An important milestone in the history of management thought occurred when researchers went beyond the study of how managers can influence behaviour within organizations to consider how managers control the organization’s relationship with organizational its external environment, or organizational environment—the set of forces and con- environment ditions that operate beyond an organization’s boundaries but affect a manager’s abil- The set of forces and ity to acquire and use resources. Resources in the organizational environment include conditions that operate beyond an organization’s the raw materials and skilled people that an organization needs to produce goods and boundaries but affect a services, as well as the support of groups—such as customers who buy these goods and manager’s ability to acquire services—that provide the organization with financial resources. The importance of and use resources. studying the environment became clear after the development of open-systems theory and contingency theory during the 1960s. The Open-Systems View open system One of the most influential views of how an organization is affected by its external A system that takes in environment was developed by Daniel Katz, Robert Kahn, and James Thompson in resources from its external the 1960s.20 These theorists viewed the organization as an open system—a system that environment and converts takes in resources from its external environment and converts or transforms them them into goods and services into goods and services that are then sent back to that environment, where they are that are then sent back to that environment for purchase by bought by customers. customers. The system is said to be “open” because the organization draws from and interacts with the external environment in order to survive; in other words, the organization closed system is open to its environment. A closed system, in contrast, is a self-contained system A system that is self-contained and thus not affected by that is not affected by changes that occur in its external environment. Organizations changes that occur in its that operate as closed systems, that ignore the external environment, and that fail to external environment. acquire inputs are likely to experience entropy, the tendency of a system to dissolve and disintegrate because it loses the ability to control itself. entropy Researchers using the open-systems view are interested in how the various parts The tendency of a system to dissolve and disintegrate of a system work together to promote efficiency and effectiveness. Systems theorists because it loses the ability to like to argue that “the parts are more than the sum of the whole”; they mean that an control itself. organization performs at a higher level when its departments work together rather than separately. Synergy, the performance gains that result when individuals and synergy departments coordinate their actions, is possible only in an organized system. The Performance gains that result when individuals and recent interest in using teams comprising people from different departments reflects departments coordinate their systems theorists’ interest in designing organizational systems to create synergy and actions. thus increase efficiency and effectiveness. Contingency Theory contingency theory Another milestone in management theory was the development of contingency The idea that managers’ theory in the 1960s by Tom Burns and G.M. Stalker in the United Kingdom and Paul choice of organizational Lawrence and Jay Lorsch in the United States.21 Recognizing that organizations need structures and control systems depends on—and to acquire valuable resources, the crucial message of contingency theory is that there is contingent on—the is no one best way to organize: The organizational structures and the control systems characteristics of the external that managers choose depend on—and are contingent on—the characteristics of the environment in which the external environment in which the organization operates. organization operates. An important characteristic of the external environment that affects an organiza- tion’s ability to obtain resources is the degree to which the environment is changing. Changes in the organizational environment include: changes in technology, which can lead to the creation of new products (such as compact discs) and result in the disappearance of existing products (such as eight-track tapes); the entry of new jon67431_Appendix A.indd 440 11/27/2009 9:11:40 AM  Second Pages The Evolution of Management Theory 441 competitors (such as foreign organizations that compete for available resources); and unstable economic conditions. In general, the more quickly the organizational envi- ronment is changing, the greater are the problems associated with gaining access to resources and the greater is the manager’s need to find ways to coordinate the activities of people in different departments in order to respond to the environment quickly and effectively. The basic idea behind contingency theory—that there is no one best way to design or lead an organization—has been incorporated into other areas of management theory, including leadership theories. Key Terms administrative management, p. 435 open system, p. 440 authority, p. 436 organizational behaviour, p. 438 behavioural management, p. 438 organizational environment, p. 440 bureaucracy, p. 436 rules, p. 436 closed system, p. 440 scientific management, p. 434 contingency theory, p. 440 standard operating procedures (SOPs), entropy, p. 440 p. 436 informal organization, p. 438 synergy, p. 440 job specialization, p. 434 Theory X, p. 439 management science theory, p. 439 Theory Y, p. 439 norms, p. 436 jon67431_Appendix A.indd 441 11/27/2009 9:11:40 AM