THE EVOLUTION OF
MANAGEMENT
THOUGHT, 6TH EDITION
Electronic Resource by:
Regina Greenwood and Julia Teahen
Part Four
The Modern Era
http://www.bigphoto.com/themes/traffic/railway
Chapter Nineteen
Management Theory and Practice
The Modern Era

The Renaissance of General Management
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
Fayol’s Intellectual Heirs
Management Education
 Other

Views of Managerial Work
 Peter Drucker: The Guru of Management
From Business Policy to Strategic Management
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
Markets and Hierarchies
Governance and Agency Issues
Management as an Integrating and Innovating Task
Strategy and Views of the Firm
Strategic Leadership and Evolutionary Dynamics
The Renaissance of General Management

Henri Fayol – the first to
propose a general
theory of management
The elements of
management describing
what managers did
(plan, organize,
command, coordinate,
and control).
 The principles, which
were lighthouses, or
guides, to how to
manage.

Fayol’s Intellectual Heirs



William Newman (1909-2002) – “the basic objectives
of the firm should define its place or niche in the
industry, define its social philosophy as a business
‘citizen,’ and serve to establish the general managerial
philosophy of the company” (Wren text)
George Terry (1909-1979)– first to call his book
Principles of Management
Harold Koontz (1908-1984) and Cyril O’Donnell (19001976) – defined management as “the function of getting
things done through others” in their popular text.
Management Education



The Gordon and Howell Report 1959
Asked: What are we teaching in business schools
and does this prepare our students for a career in
a changing environment?
Cited the need for more courses in:
 The
humanities and liberal arts.
 Mathematics.
 The behavioral and social sciences.
Business School Curriculum
Compare a pre-1959 Business school curriculum to the current requirements in this
business program.
Management Theory Jungle
Harold Koontz (1908-1984)

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
Six Different Schools – management process, empirical,
human behavior, social system, decision theory,
mathematical schools.
Each can contribute, but some are “tools.”
Causes of confusion and the “jungle warfare”



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“The semantics jungle”
Problems in defining management as a body of knowledge
The misunderstanding of principles through trying to disprove
an entire framework of principles when one principle was
violated in practice
Inability or unwillingness of management theorists to understand
each other.
Other Views of Managerial Work

Henry Mintzberg
Courtesy of McGill University
Henry Mintzberg
(1939- observed five
executives and
concluded mangers
perform ten roles
within three
categories:
interpersonal,
informational, and
decisional.
Other Views of Managerial Work


Rosemary Stewart examined the "demands,"
"constraints," and "choices” of a managers job.
John Kotter's studies of general managers and his
finding of certain "demands" or regularities in all
general managers' jobs that resemble traditional
management functions. Note, also, the factors that
cause these to vary.
Other Views of Managerial Work


Richard M. Hodgetts
Fred Luthans, Richard
Hodgetts, and Stuart
Rosenkrantz studied 44
managers, recording
activities and behaviors.
In Real Managers, 1988,
they note four
categories: Routine
communication,
traditional management,
networking, and human
resource management.
The Search for Excellence


Thomas Peters and
Robert Waterman
identified eight
attributes of
corporate excellence
in their best selling
book, In Search of
Excellence.
Peters and Waterman
relied solely on
financial measures in
Management Education Revisited

Harold Koontz revisited the management theory
jungle and expanded it from 6 to 11 approaches.
 Called
for leading managers to narrow the gap
between professional practice and business schools.

Lyman Porter and Lawrence McKibbin surveyed
management education for the AACSB.
 Called
for professors to be more broadly educated
and possess relevant work experience.
Peter Drucker (1909 – 2005)
Guru of Management Practice


Drucker achieved prominence
through his writings and
consulting.
He asks:
 What is our business?
 Who I the customer?
 What does the customer
buy?
 What does the customer
consider value?
 What will our business be?
 And what should it be?
Peter Drucker (1909 – 2005)
Guru of Management Practice


Importance on Innovation
Key areas for setting objectives and evaluating
results
 Fortune
magazine publishes a survey of the most
“admired” corporations. The areas that Fortune uses
bear a strong resemblance to Drucker’s key areas.

Management by Objectives
Peter Drucker (1909 – 2005)
Guru of Management Practice

Drucker’s focus on
managerial practice
asks the lingering
question: “Can our
academic research
have rigor and also
be relevant to the
practice of
management?”
From Business Policy to Strategic Management

Ronald Coase
Markets and hierarchy
 Echoing the work of earlier
economists such as Say and
Marshall, who saw
management as a factor of
production and able to
provide competitive
advantage, Ronald Coase, in
a 1937 article, asked why
have business firms?
 Coase saw the firm as an
alternative to the market
with certain advantages in
allocating resources.
From Business Policy to Strategic Management

Oliver Williamson (1932-)
and the “new institutional
economics” saw the
hierarchy of the firm being
typically more efficient
than markets because firms
could internalize transaction
costs and provide
monitoring mechanisms to
thwart, hopefully,
opportunism.
Oliver Williamson
From Business Policy to Strategic Management

Governance and Agency Issues
 If
the firm, through management, is more efficient than
the market, then the actions of those who govern the
firm becomes more significant.
 A number of individuals, such as Michael Jensen,
criticize the behavior of those in the managerial
hierarchy who serve their own interests rather than
those of their shareholders.
 The separation of ownership and control is an
evergreen issue to catch the conscience that lies within.
From Business Policy to Strategic Management

Agency theory…
 assuming
it is a theory, creates situations that lead to
opportunistic behavior.
 Assumes that everyone will engage in opportunistic
behavior—leading to contracts and other means of
monitoring behavior.
 Involves issues of trust, fidelity, and other appropriate
behaviors in contrast to the assumptions of agency
theory.
Assumptions
How do our assumptions about the behavior of
others influence how we manage?
Management as an Integrating and Innovative
Task


Henri Fayol
Henri Fayol was a
strategist.
Arch Shaw (1876-1962)
pioneered the study of
business policy as a
academic subject at
Northwestern University.
Management as an Integrating and Innovative
Task


Alfred D. Chandler,
Courtesy of Harvard Business School
There is a rich heritage of
“strategy” in Barnard,
Newman, Drucker, and
Chandler.
Strategic management has
emerged as the “new” view
of business policy and long
range planning.
From Business Policy to Strategic Management

Strategy and Views of
the Firm
 Michael Porter (and
others) in
industrial/organization
al economics made
key contributions to
strategy.
 Porter’s “five forces”
framework, value
chain and “generic”
strategies.
Michael E. Porter,
Courtesy of Harvard Business School
From Business Policy to Strategic Management

Strategy and Views of the Firm
 Edith Penrose (1914-1996) asked why firms differed
in performance, providing seminal insights for the
resource based and the knowledge based views of
the firm.
 SWOT— In 1960s HBS policy group began use of the
term.
 Important developments in “core competencies” and
“distinctive competencies” followed through the work
of Wernerfelt, Rumelt, Barney, Prahalad, and Hamel.
From Business Policy to Strategic Management

Strategic Leadership and Evolutionary Dynamics
 “Evolutionary
economics”—how to create and gain
competitive advantages through innovation.
 Organizational learning to “unbound” rationality and
move to new and innovative forms of competitive
advantage.
 Strategic leadership—the bridge to general
management theory.
Summary

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General management theory reawakened as
organizations grew more complex and needed
more broadly educated general managers.
Drucker and others emphasized the need to
improve the practice of management.
General management also grew through a
resurgence in industrial/organizational economics.
Business policy evolved to strategic management.