Management Theory Evolution PDF

Chapter Two The Evolution of Management Theory Nov 2011  Management is as old as human civilization Egyptians, Babylonians, Greeks, Hebrews, Chinese, Romanians… practiced management Churches and Military contributed to the development of management Early c...

Chapter Two The Evolution of Management Theory Nov 2011  Management is as old as human civilization Egyptians, Babylonians, Greeks, Hebrews, Chinese, Romanians… practiced management Churches and Military contributed to the development of management Early contributors: Robert Owen, Charles Babbage,… But as a theory, it is the result of 20th century. Nov 2011  Modern management began in the late 19th century. – Organizations were seeking ways to better satisfy customer needs. – Machinery was changing the way goods were produced. – Managers had to increase the effi ciency of the worker-task mix. Nov 2011  Job specialization Adam Smith, 18th century economist, found firms manufactured pins in two ways: – Craft -- each worker did all steps. – Factory -- each worker specialized in one step. Smith found that the factory method had much higher productivity. – Each worker became very skilled at one, specific task. Breaking down the total job allowed for the division of labor. Nov 2011. Evolution of Management Theory Modern Management Theories Neo-classical Management Theories Classical Management Theories Nov 2011  Classical Management Theories People are economically rational In 20th c, the concern in management was how to increase productivity and effi ciency of workers Two perspectives : Improving the productivity of the work force (scientific management) and managing the entire organization (classical organization theory) Nov 2011  Scientific Management theory Defined by Frederick WinslowTaylor (USA 1856- 1915). The first person to recognize the need to adopt a scientific approach to management The systematic study of the relationships between people and tasks to redesign the work for higher effi ciency. – Taylor sought to reduce the time a worker spent on each task by optimizing the way the task was done. Nov 2011 Taylor’s four principles The development of a true science of management, so that the best methods for performing each task could be determined. The scientific selection of workers, so that each worker would be given responsibility for the task for which he or she was best suited. The scientific education and development of the worker. Intimate, friendly cooperation between management and labor. Nov 2011  The principles required “Mental Revolution” on the part of management and labor He introduced differential rate system. Better rate for more effi cient workers. He summed up his approach in these words: □Science, not rule of thumb □Harmony, not discord □Co-operation, not individualism □Maximum output, in place of restricted output □The development of each man to his greatest effi ciency and prosperity. Nov 2011  Problems of scientific management 1. Worker's Criticism: (a) Speeding up of workers (b) Loss of individual worker's initiative: (c) Problem of monotony (d) Reduction of Employment (e) Weakening of Trade Unions (f) Exploitation of workers 2. Employer's Criticism: (a) Heavy Investment: (b) Loss due to re-organization: (c) Unsuitable for small scale firms: Nov 2011 Henry Lawrence Gantt (USA, 1861 - 1819) : He worked with Taylor from 1887 - 1919 at Midvale Steel Company Gantt’s contributions: Gantt chart to compare actual to planned performance. Task-and-bonus plan aimed at providing extra wages for extra work besides guarantee of minimum wages. Psychology of employee relations indicating management responsibility to teach and train workers. He laid great emphasis on leadership. Nov 2011  The Gilbreths Frank (USA, 1867 - 1924) and Lillian (U.S.A, 1878 - 1912) Frank and Lillian Gilbreth refined Taylor’s methods. – Made many improvements to time and motion studies. Time and motion studies: – 1. Break down each action into components. – 2. Find better ways to perform it. – 3. Reorganize each action to be more effi cient. Gilbreths also studied fatigue problems, lighting, heating and other worker issues. Gave a thought to the welfare of workers Gilbreth also devised methods for avoiding wasteful and unproductive movements. Nov 2011  Administrative Management This approach to management, also function and process approach is primary based on the idea of Henry Fayol (1841- 1925) His acute observations on the Principles of general management first appeared in 1916 in French He was the first person to discuss management as a process with specific functions that any manager should perform Nov 2011  Industrial activities Fayol divided industrial undertakings in to six groups: 1.Technical (Production) 2.Commercial (buying, Selling and exchanging). 3.Financial (Search for, and optimum use of capital). 4.Security (Protection of property and persons). 5.Accounting (including Statistics). 6.Managerial (Planning, organization, command, coordination and control). Fayol observed that first five were well known and he devoted most of his book to an analysis of the sixth. Nov 2011  Fayol’s Principles 1. Division of Labor: allows for job specialization. Fayol noted firms can have too much specialization leading to poor quality and worker involvement. 2. Authority and Responsibility: Fayol included both formal and informal authority resulting from special expertise. 3. Unity of Command: Employees should have only one boss. 4. Line of Authority: a clear chain from top to bottom of the firm. 5. Centralization: the degree to which authority rests at the very top. Nov 2011  Fayol’s Principles 6. Unity of Direction: One plan of action to guide the organization. 7.Equity: Treat all employees fairly in justice and respect. 8.Order: Each employee is put where they have the most value. 9. Initiative: Encourage innovation. 10.Discipline: obedient, applied, respectful employees needed. Nov 2011.  Fayol’s Principles 11.Remuneration of Personnel: The payment system contributes to success. 12.Stability of Tenure: Long-term employment is important. 13.General interest over individual interest: The organization takes precedence over the individual. 14.Esprit de corps: Share enthusiasm or devotion to the organization. Nov 2011  Theory of Bureaucracy Developed by Max Weber (1864-1920). Bureaucracy refers to the formal structural process within an organization. Weber’s “pure form” of organization is characterized by rationality and impersonality. Rationality refers to how the parts of organizations are designed and coordinated to achieve specific ends. Impersonality implies objectivity in interpersonal relations Nov 2011.  Bureaucratic Principles Written Written rules rules System System ofof task task A Bureaucracy Hierarchy Hierarchy of of relationships authority relationships should have authority Fair Fair evaluation evaluation and and reward reward Nov 2011  Key points of Bureaucracy Authority is the power to hold people accountable for their actions. Positions in the firm should be held based on performance not social contacts. Position duties are clearly identified. People should know what is expected of them. Lines of authority should be clearly identified. Workers know who reports to who. Rules, Standard Operating Procedures (SOPs), & Norms used to determine how the firm operates. Advantages: precision, speed, un ambiguity, continuity, unity, strict subordination and the like. Disadvantages: red -tape or excessive procedure, rigidity, and neglect of the human factor. Nov 2011.  Contributions of Classical management thought Contributions: Identified the field of management and its process and functions Job analysis, work simplification, incentive wage systems, etc. The application of the idea of productivity and effi ciency to many organization Provision of guidelines and principles that tend to be important to all types of organizations Nov 2011  Limitations Insights from classical management are simplistic for today’s complex organizations Reliance on experience Untested assumptions Failure to consider informal organizations Human machinery Nov 2011.  Neo Classical Theories Modified, improved, and extended the classical management approach Two branches: Human Relations approach and behavioral approach Nov 2011.  Human relations Approach Hawthorne studies Led by Elton Mayo (AUS 1880 – 1949) Study of worker effi ciency at the Hawthorne Works of the Western Electric Co. during 1924-1932. – Worker productivity was measured at various levels of light illumination. – Researchers found that regardless of whether the light levels were raised or lowered, productivity rose. Actually, it appears that the workers enjoyed the attention they received as part of the study and were more productive. Informal work groups and the social environment of employees have positive influence on productivity. Employee’s motivation is based on both physiological, and socio-psychological needs. Nov 2011  Behavioral science approach Man is much more complex than the “economic man” and “social man” descriptions This approach concentrates more on the nature of the work itself, and the degree to which it can fulfill the human need also focused on communication, motivation and leadership areas. Contributors: Elton Mayo, Douglas McGregor, Abraham Maslow, etc. Nov 2011  McGregor’s Theory X and Theory Y Douglas McGregor proposed the two different sets of worker assumptions.  Theory X: Assumes the average worker is lazy, dislikes work and will do as little as possible. Managers must closely supervise and control through reward and punishment.  Theory Y: Assumes workers are not lazy, want to do a good job and the job itself will determine if the worker likes the work. Managers should allow the worker great latitude, and create an organization to stimulate the worker. Nov 2011.  Theory X v. Theory Y Theory Theory XX Theory Theory YY Employee Employeeisislazy lazy Employee Employee is not is not lazy lazy Managers Managersmustmust Must Must create create work work setting setting to to build build closely closely supervise supervise initiative initiative Create Createstrict strictrules rules&& defined Provide Provideauthority authoritytoto rewards defined rewards workers workers Nov 2011.  Modern Theories further refinement, extension, and synthesis of all the classical and neoclassical approaches to management Link the twin primary objectives of productivity (classical approach) and employee satisfaction (neoclassical approach) Nov 2011  The Management Science Approach Uses rigorous quantitative techniques to maximize resources. Quantitative management: utilizes linear programming, modeling, simulation systems. Operations management (Research): techniques to analyze all aspects of the production system. Egs. Critical path method (CPM), Economic order quantity (EOQ ) Total Quality Management (TQM): focuses on improved quality. Management Information Systems (MIS): provides information about the organization. Nov 2011.  Organization-Environment Theory Considers relationships inside and outside the organization. – The environment consists of forces, conditions, and influences outside the organization. Systems theory considers the impact of stages: Input: acquire external resources. Conversion: inputs are processed into goods and services. Output: finished goods are released into the environment. Nov 2011.  Systems Considerations System: A set of interrelated parts that work together to achieve an objective. Subsystems: Those parts making up the whole system. An open system interacts with the environment. A closed system is self- contained. – Closed systems often undergo entropy and lose the ability to control itself, and fails. Synergy: performance gains of the whole surpass the components. – Synergy is only possible in a coordinated system. Nov 2011  The Organization as an Open System Input Stage Conversion Output Information Stage Stage Raw Materials Energy Machines Goods Human Services skills Sales of outputs Firm can then buy inputs Nov 2011  Contingency Theory Assumes there is no one best way to manage. – The environment impacts the organization and managers must be flexible to react to environmental changes. – The way the organization is designed, control systems selected, depend on the environment. Technological environments change rapidly, so must managers. Nov 2011  Emerging Trends in Management Individual assignment to write a one page summary bout the following trends and management contributor: TQM and Six Sigma BPR Theory Z Peter F. Drucker (November 19, 1909– November 11, 2005) Nov 2011