WESTERNSYDNEY UNIVERSITY Commonwealth of Australia Copyright Act 1968 WARNING This material has been reproduced and communicated to you by or on behalf of Western Sydney University in accordance with Section 113P, Copyright Act 1968 (the Act). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Do not remove this notice. Learning outcomes In this chapter, we are going to take a trip back in time to see how the field of study called management has evolved. History is important because it can put current management practices in perspective . What you are going to find out is that today 's managers still use many elements of the historical approaches to management. We will also look at some of the current trends and issues that are influencing management in today 's organisations . Focus on the following learning outcomes as you read and study this chapter : 2.1 Provide some examples of early management practice. 2.2 Discuss the important contribut ions of scientific management and general administrative theorists within the classical approach . 2.3 Discuss the development and uses of the organisational behaviour approach. 2.4 Describe the quantitative appr oach. 2.5 Explain the systems and cont ingency theories in the contemporary approach . 2.6 Provide examples of current trends and issues that are influencing management today. HAVE YOU EVER wondered why franchised organisations are often the most successful traders, especially in retail fields? Take, for example , Bakers Delight , which has a presence in most of the major shopping centres in Australia and New Zealand, and also in Canada and the United States under the bake products within any of the franchise outlets unless they name of Cobs Bread. 1 As of 2017, Bakers Delight had over have achieved the required qualifications . 700 outlets across these four countries. This business network Other aspects of running a Bakers Delight bakery that consists of around 95 per cent franchised outlets and 5 per come under the franchisor's control include: staff wage rates, cent company-owned outlets. There were more than 500 uniform dress and presentation standards, fit-out standards, individual franchisees, some of which own multiple outlets, work health and safety compliance, staff training requirements, but most own only one outlet. Bakers Delight serves more payment of suppliers , reporting sales figures to the franchisor , than 2 million customers a week and achieves a global turnover hours of operation, of more than $600 million. All this started with a single bakery merchandi se. A few specialised products are supplied in a Melbourne suburb in 1980. approved suppliers ; however, almost all products are baked The reason for Bakers Delight's success is its ability to and methods of disposal of surplus by daily and must be sold that day. The information techno logy (IT) maintain a uniformly high standard of merchandise in all its system that is used to manage the stores is also centralised, stores within a given country. How is this achieved, despite most and all outlets must use this system so that information on of the stores having different owners? All Bakers Delight stores turnover, both of money and of individual products for all use exactly the same business model, and they maintain this stores, is available centrally and, where applicable, uniformly uniform standard of both the merchandise and the experience across the network of outlets. This means that the franchisor of shopping at a Bakers Delight bakery by implementing a can use this information for both planning and control purposes . rigorous management process. The individual outlets can use feedback from the IT system to It all starts with the appearance of the outlet. Bakers Delight supplies all the fittings and equipment used in all benchmark their individual outlets. The selection process for new franchisees has been outlets and, although there may be some slight variation in developed by an organisational psychologist and results in how an indiv idual outlet is arranged , it gives the appearance of people being selected not only for their likely success but also uniformity . The customer feels comfortable that they know for their willingness to fit in. There is also an operational support what will be available in the store and where, that the staff will team consisting of a general manager of operations, a regional be wearing the familiar uniform , and that the merchandise will or state manager, and a number of area managers with be the same baked-daily high-quality baked goods that they responsibility for approximately 30 bakeries each. These area have been able to purchase from any other Bakers Delight managers regularly call on individual bakeries to provide advice outlet. Although almost all the bread, buns and other products and support , as well as feedback to the central management of are baked daily in each individual bakery, their raw materials the organisat ion. It is clear that the entire Bakers Delight network come from suppliers selected and approved by the central is well planned, organised, led and controlled to make sure that organisation . The methods of preparation and baking are all customers receive a uniformly high-quality product and have rigorously controlled to a set formula , which has been tried and a pleasant shopping experience that will encourage them to tested within a central baking facility . No person is allowed to come back again. Part 1 Introduction to management 38 Current management theory and practices did not just suddenly appear. They evolved over many years. If you study today's organisations, you will fmd examples of management practices that in some cases can be traced back 50 or more years. To illustrate this point, we have used Bakers Delight as an exari1ple. It is an organisation that most of you have visited at some time. Part of the reason for Bakers Delight's success is a management system that makes sure nothing is left to chance. The whole process of producing the baked products on its shelves, and how they are being prepared and presented to the custom ers, is carefully designed and orchestrated by·management to ensure that the same high standards are achieved at all times. Looking at the history of management can help us understand today's management theory and practice. It can help us to see what did and did not work. In this chapter, we will introduce you to the origins of many historical and contemporary management concepts and show how they have evolved to reflect the changin g needs of organisations and society as a whole. We will also introduce important trends and issues that managers curre ntly face, in order to link the past with the future and to demonstrate that the field of management is still evolving. HISTORICAL BACKGROUND OFMANAGEMENT 2.1 LEARNING OUTCOME Provide some examples of early management practice . division of labour (or job specialisation) Thebreakdownof jobs into narrow and repetitivetasks. Management has been practised throu ghout history. Or ganised endeavours directed by people responsible for planning , organising, leading and controlling activities have existed for thousands of years. The Egyptian pyramids and the Great Wall of China, for instance, are proof that projects of tremendous scope, employing tens of thou sands of people, were undertaken well before modern times. The pyramids are a particularly interesting example. The construction of a single pyramid occupied more than 100 000 workers for 20 years.2 Who told each worker what to do? Who ensured that there would be enough stones at the site to keep the workers busy? The answer to such questions is managers . Regardless of what managers were called at the time, someone had to plan what was to be done, organise people and materials to do it, lead and direct the workers, and impose some con trols to ensure that everything was done as planned. Another examp le of early managemen t can be seen durin g the 1400s in the city of Venice, Italy, which was a major economic and trade centre. The Venetians developed an early form of business enterprise and engaged in many activities common to today's organisations. For instance, at the arsenal of Venice, warships were floated along the canals and at each stop materials and riggings were added to the ship. Does this process not sound a lot like a car 'floating' along an assembly line and components being added to it? The Venetians also had a warehouse arid an invento ry system to keep track of materials, human resource management functions to manage the labour force (includin g wine breaks), and an accounting system to keep track of revenues and costs.3 These examples from the past demon strate that organisations have been around for thousands of years and that management has been practised for an equivalent period. However, two pre-20 th-century events played particularly significant roles in promoting the study of management. First, in 1776 Adam Smith published a classic economics doctrine, The Wealthof Nations, in which he argued the economic advantages that organisations and society would gain from the division of labour (or job specialisation) , the breakdown of jobs into narrow and repetitive tasks. Using the pin manufacturing industry as an example, Smith claimed that ten individuals, each doing a specialised task, could produce about 48 000 pins a day between them. Howe ver, if each person worked separately and had to perform each task, it would be difficult to produce even ten pins a day! Smith concluded that division oflabour increased productivity by increasing each worker's skill and dexterity, by saving time lost in changing tasks, and by 39 Chapte r 2 Management history creating labour-saving inventions and machinery. Job specialisation continues to be popular - for examp le, think of the specialised tasks performed by members of a hospital surgery team, meal preparation tasks done by workers in restaurant kitc hens, or positions played by mem bers of a cricket team - because of the economic advantages cited by Adam Smith. The second important, pre-20th-century influence on management was the Industrial Revolution . Starting in the 18th century in Great Bri tain, the revolutio n had crossed the Atlantic to America by the end of the Amer ican Civil War. The main contribut ion of the Industrial Revolution was that human power was replaced by machine power, which, in turn, made it more economical to manufacture goods in factories rather than at home. These large, efficient factories using power-driven equipment required managerial skills. Why? Someone needed to forecast demand, ensure that enough material was on hand to make products , assign tasks to people , direct daily activities, coordinate the various tasks, ensure that the machines were kept in good working condition and that work standards were maintaine d, find markets for the finished produ cts, and so forth. That 'someone' was a manager. Planning, organising , leading and controlling became necessary, and the development oflarge cor porations would require formal management practi ces. The need for a formal theory to guide managers in running these organisation s had arrived. How ever, it was not until the early 1900s that the first major step towards developing such a theory was taken. In the next sections, we present the four main approaches to management: classical, behavioural, qu antitative and con temporary (see Figure 2.1). Keep in mind that each Historical background Early examples of management Classical approaches Behavioura l approach Quantitative approach Scientific M any organisations have used the principl es of scientific manageme nt in the creation of assembly lines to maximise the ir production efficiency. R,1inerPlendl! Sh11ttcrstt1ck. Industrial Revolution A period during the late 18th century when machinepower was substituted for humanpower,makingit more economicalto manufacturegoods in factories than at home. Contemporary approaches Systems app roach Adam Smith Hawthorne Studies Industrial Revolution Human relations movement Behavioural science theorists FIGURE2.1 Major appro aches to management Cont ingency approach 40 Part 1 Introduction to management approach is concerned with the same 'animal'; the differences reflect the backgrounds and interests of the writer. A relevant analogy is the classic story of the blind men and the elephant, in which each man declares the elephant to be like the part he is feeling: the first man touching the side declares that the elephant is like a wall; the second touches the trunk and says the elephant is like a snake; the third feels one of the elephant' s tusks and believes it to be like a spear; the fourth grabs a leg and says an elephant is like a tree; and the fifth touches the elephant's tail and concludes that the animal is like a rope. Each is encountering the same elephant, but what each observes depends on where he stands. Similarly, each of the four approaches contributes to our overall understanding of management. However, each is also a limited view of what it is and how best to practise it. We will begin our journey into management's past by looking at the first major approach to management - the classical approach. review questions 1 Explain why studying management history is important. 2 Describe some early examples of management practice. 3 Discuss the influence of the Industrial Revolution. CLASSICAL APPROACH 2.2 LEARNING OUTCOME Discuss the important contributions of scientific management and general administrative theorists within the classical approach. classical approach Firststudiesof management,which emphasisedrationalityandmaking organisationsand workersas efficient as possible. scientific management An approachthat involvesusing scientific methodsto definethe 'one best way' for a job to be done. Although we have seen how management has been used in organised efforts since early history, the formal study of management did not begin until early in the 20th century. These first studies of management, often called the classical approach , emphasised rationality and making organisations and workers as efficient as possible. Two major theories comprise the classical approach : scientific management and general administrative theory. The two most important contributors to scientific management theory were Frederick W Taylor and the husband-wife team of Frank and Lillian Gilbreth . The two most important contributors to general administrative theory were Henri Fayol and Max Weber. Let us take a look at each of these important figures in management history. Scientificmanagement If you had to pinpoint the year modern management theory was born, 1911 might be a logical choice. That was the year Frederick Winslow Taylor's Principles of ScientificManagement was published. Its contents became widely accepted by managers around the world. The book described the theory of scientific management : the use of scientific methods to define the 'one best way' for a job to be done. Frederick W. Taylor Taylor did most of his work at the Midvale and Bethlehem Steel Companies in Pennsylvania. As a mechanical engineer with a Quaker and Puritan background, he was continually appalled by workers' inefficiencies. Employees used vastly different techniques to do the same job. They were inclined to 'take it easy' on the job, and Taylor believed that worker output was only about one-third of what was possible. Virtually no work standards existed. Workers were placed in jobs with little or no concern for matching their abilities and aptitudes with the tasks they were required to do. Managers and worker s were in continual conflict . Taylor set out to correct the situation by applying the scientific method to shopfloor Chapter 2 Management history TABLE 2.1 Taylor's four principles of scientific management 1. Develop a science for each element of an indiv id ual's work with standardised work implements and efficient methods for all to follow. 2. Scientifi cally select workers with skills and abilities that match each job and train them in the most efficient ways to accom pli sh tasks. 3. Ensure coo perati on through incent ives, and provide the work envi ronment tha t reinforces optimal work results in a scientific manner. 4. Divide respo nsibi lity for managing and fo r working, while support ing individuals in work groups doing what they do best. Some people are more capable of managing, whereas others are better at performing tasks laid out for them. S011rce: F.W Taylor, Pri11ciples of ScientificManagement(New York: Harper , 191 I). jobs . He spent more than two decades passionat ely pursuing the 'o ne best way' for each job to be done . Taylor's experiences at Midvale led him to define clear guideline s for improving produ ction efficiency. He argued that these four principles of management (see Table 2.1) would result in prosperity for both workers and manag ers.4 How did these scientific principles really work? Let us look at an example. Probably the best-known example of Taylor 's scient ific management was the pig-iron experiment. Worker s loaded 'pigs' of iron (each weighing 42 kilograms) on to rail cars. Their daily average output was 12.5 tons. How ever, Taylor believed that by scientifically analysing the job to determine the 'one best way' to load the pig iron, output could be increased to 47 or 48 tons per day. After scientifically trying different combinations of pro cedures, technique s and tools, Taylor succeeded in getting that level of productivity . How? He put the right person on the job with the correct tools and equipment, had the worker follow his instructions exactly, and motivated the worker with an economic incentive of a significantly higher daily wage. Using similar approa ches to other jobs, Taylor was able to define the 'one best way' for doing each job. Overall, he achieved consistent productivity improvements in the range of 200 per cent or more. Through his ground breaking studies of manual work using scientific principles, Taylor became known as the 'father' of scientific management. His ideas spread in the United States (where, for examp le, Henry Ford applied ideas of scient ific management to the manufacturing of the Model T automobile), but also in France, German y, Russia and Japan, and inspired others to study and develop method s of scientific manag ement . His most prominent followers were Frank and Lillian Gilbreth. Frank and Lillian Gilbreth A construction contractor by trade, Frank Gilbreth gave up his contracting career in 1912 to study scientific management after hearing Frederick Taylor speak at a professional meeting. Frank and his wife, Lillian, a psychologist , studied work to eliminate wasteful hand-andbody motions . The Gilbreth s also experimented with the design and use of the proper tools and equipment for optimising work performanc e.5 As parents of 12 children , the Gilbreth s also ran their household using scientific management principle s and techniques . In fact, two of their children wrote a book, Cheaperby the Dozen, which described life with the two masters of efficiency. 41 42 Part 1 Introduction to management McDonald's scientific management approach 6 Wherever Whetheryoulikeit ornot,McDonald's is regarded asthemasterof fast-foodservice. youordera BigMacmealin theworld,youcanexpectexactlythesamequalityof productand service . Theburgeris neverovercooked , the friesarealwayscrisp,the staffalwayssmile,and the restaurantis alwayscleanandtidy.Considering that McDonald 's hasmorethan36 000 storesin morethan100countriesandmorethan1.9 millionpeopleworkingfor them,howdo theyachievesucha highconsistency? Therecipefor McDonald's success is a management systemthat makessurenothingis left to chance,like Frederick Taylorsuggestedin his scientificmanagement principle s. McDonald's hasscientificallyresearched the mostefficientcooking , freezing,storingandservingmethod s. Forexamp le, hamburger pattiesarepre-packed andpre-measured anddeliveredto the stores in a frozenform.Thebasichamburger pattyis a machine-cut serveof purebeefweighing1.6 ounces, or45.4grams.Thesamegoesfor thefries, whicharedelivered frozenin a pre-cutand partiallycookedformto reducethetimeit takesto deep-frythemin the store. McDonald's has generally adopted Taylor's four principles of scientific management to achieve high efficiency levels in its operations. Alex Segre/AlamySt,xk Photo. Thecompany hasalsoworkedoutthemostefficientwayto serveitemsfromits menu,byusing time-and-motion studiesandstudiesof hand-and-body movements basedon FrankandLillian Gilbreth'soriginalideas. Forexample, to fill the bagswith fries,McDonald's hasdesigned a scoopthat speedsupthefillingprocess at the sametimeas it ensures a consistent amountof friesgoesinto the bag.Thestaff memberinsertsthe handleof the speciallydesigned scoop intoa bag. Then,in onecontinuousmoveme nt, heorshescoopsupfriesuntiltheexactquantity is reached. As the scoopis raisedupwards, thefriesgo intothe bagandasthe bagis filled,it automatically disengages fromthe handleby the weightof its contents.Consider howmuch timethis simplebutbrilliantideasavesMcDonald's, whentheyservemanymillionsof bagsof trenchfrieseveryday! Theconsistenthighstandardof the service is achievedby carefulselectionandtrainingof staff. McDonald's training programis secondto nonein the hospitalityindustry,and is designed to ensurethat McDonald's staff members have the necessaryskillswhenit comesto foodpreparation and service.However , it doesnot endthere.McDonald 's training alsoincludes developing otherskills,suchascommunica tion, timemanagement, relation shipbuildingandleadership skills. By studyingsomeof the ideasfrom management history, we canbetterunderstand today'smanagement theoriesand practices . It canhelpusseewhatworked,andwhatdid not workandwhy.So,the nexttimeyoustepintoa McDonald 's, takea closerlookat howtheyoperateandreflecton what youcanlearnfromthis. Frank Gilbreth is probabl y best known for his experim ent s in bri cklayin g. By carefully analysin g the brickla yer's job , he reduc ed the numb er of moti ons in layin g exter ior bri ck from 18 to about 5, and in laying interior brick from 18 to 2 . Usin g Gilbr eth 's techniqu es, the brickla yer could be both more pro du ctive and less fatigued at the end of the day. 43 Chapter 2 Management history The Gilbreths were among the first researchers to use motion pictures to study handand-body motions,_ They invented a device, called a microchronometer, that recorded a worker's motions and the amount of time spent doing each motion. Wasted motions missed by the naked eye could be identified and eliminated. The Gilbreths also devised a classification scheme to label 17 basic hand motions (such as search, grasp, hold), which they called therbligs (Gilbreth spelled backwards with the 't' and the 'h' transposed). This scheme allowed the Gilbreths a more precise way of analysing a worker's exact hand movements. therbligs A classificationsystemfor labelling basichandmotions. Howdo today's managersuse scientific management? Many of the guidelines and techniques Taylor and the Gilbreths devised for improving production efficiency are still used in organisations today.7 You can even see some of them in operation when you go to McDonald's, as we describe in the 'Managing from a global perspective' box in this chapter. When managers analyse the basic work tasks that must be performed, use time-and-motion studies to eliminate wasted motions, hire the best-qualified workers for a job and design incentive systems based on output, they are using the principles of scientific management. But current management practice is not restricted to the scientific management approach . In fact, we can see ideas from the general administrative theory being used as well. Generaladministrativetheory Another group of writers looked at the subject of management but focused on the entire organisation. These researchers developed more general theories of what managers do and what constituted good management practice, which formed the basis for a new perspective on management called general administrative theory . Let us look at some important contributions to this perspective. Henri Fayol Fayol was mentioned in Chapter 1 because he first identified five functions that managers perform: planning, organising, commanding, coordinating and controlling. Because his ideas were important, let us look more closely at what he had to say.8 Fayol wrote during the same time period as Taylor. While Taylor was concerned with first-line managers and the scientific method, Fayol's attention was directed at the activities of all managers. He wrote from his personal experience, as he was the managing director of a large French coal-mining firm. Fayol described the practice of management as something distinct from accounting, finance, production, distribution and other typical business functions. He argued that management was an activity common to all human endeavours in business, government and even in the home. He then proceeded to state 14 principles of management - fundamental rules of management that could be taught in schools and applied in all organisational situations. These principles are shown in Table 2.2 (see page 44). Max Weber Weber (pronounced VAY-ber) was a German sociologist who studied organisations. 9 Writing in the early 1900s, he developed a theory of authority structures and relations based on an ideal type of organisation he called a bureaucracy - a form of organisation characterised by division of labour, a clearly defined hierarchy, detailed rules and regulations, and imper sonal relationships. Weber recognised that this 'ideal bureaucrac y' did not exist in reality. Instead, he intended it as a basis for theorising about work and how work could be done in large groups. His theory became the model structural design for many of today's large organisations. The main characteristics of Weber's ideal bureaucratic structure are outlined in Figure 2.2 (see page 44). general administrative theory An approachto managementthat focuseson describingwhat managers _ do and what constitutesgood managementpractice. principles of management Fundamentalrules of managementthat couldbe taughtin.schoolsandapplied in all o·rganisationalsituations. bureaucracy A formof organisationcharacterised by divisionof labour,a clearly definedhierarchy,detailedrules and regulations,andimpersonal relationships. 44 Part 1 Introdu ction to management TABLE2.2 Fayol's 14 principles of management 1. Division of work. Specialisation increases output by making employees more efficient. 2. Authority. Managers must be able to give orders. Authority gives them this right. Along with authority, however, goes responsibility. 3. Discipline. Employees must obey and respect the rules that govern the organisation. 4. Unity of command. Every employee should receive orders from only one superior. 5. Unity of direction. The organisation should have a single plan of action to guide managers and workers. 6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organisation as a whole. 7. Remuneration. Workers must be paid a fair wage for their services. 8. Centralisation. This term refers to the degree to which subordinates are involved in decision making. 9. Scalar chain. The line of authority from top management to the lowest ranks is called the 'scalar chain'. 10 Order. People and materials should be in the right place at the right time. 11. Equity. Managers should be kind and fair to their subordinates. 12. Stability of tenure of personnel. Management should provide orderly personnel planning and ensure that rep lacements are available to fill vacancies. 13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort. 14. Esprit de corps. Promoting team spirit will build harmony and unity within the organisation. Source:Adapted from Henri Fayol, Administratio11 llld11srriel/e et Generate;Prevoya11ce, Orga11isatio11, Co1mna11de111e11t, Coordination,Controle(in French) (Paris:H. Dunod et E. Pinal. 1917). Jobs broken down into simple , routine and well -defined tasks Managers are career professionals, not owners of units they manage Positions organised in a hierarchy with a clear chain of co m ma nd of labour Authority hierarchy A bureaucracy should have Impersonality V l Formal selection Formal rules and regulations Uniform application of rules and controls , not according to personalities System of written rules and standard operating procedures FIGURE2.2 Characte ristics of Weber's bureaucra cy Source:Dased on Es,ays i11Sociologyby Max Weber, translated, edited and introduction by H.H . Gerth and D. Wright Mills (New York: Oxford University Press. 1946). Chapte r 2 Manageme nt history Bureaucracy, as described by Weber, is a lot like scientific management in its ideology. Both emphasise rationality, predictability , impersonality, techni cal competence and authoritarianism. Although Weber's writings were less operational than Taylor's, the fact that his 'ideal type' still describes many contempora ry organisations attests to the import ance of his work. Managing organisations that consist of thou sands of individuals in hundreds of locations would be impossible without a rational system, and althou gh we tend to avoid the label, bureaucracy has provided the organisational mechanisms needed to build large companies such as Ford, BP and the Australian Taxation Office. Howdo today's managersuse general administrativetheories? Several of our current managem ent ideas and practices can be directly traced to the contrib utions of the general administra tive theorists. For instance, the functional view of the manager's job can be attributed to Fayol. In addition, his 14 principles serve as a frame of reference from which many current management concepts - such as manageria l authority, cent ralised decision making, reporting to only one boss, and so forth - have evolved. Weber's bureaucracy was an attempt to formu late an ideal prototype for organisations. Although many characterist ics of Weber's bureaucracy are still evident in large organisations, his model is not as popular today as it was throughout most of the 20th century. Many contemporary managers feel that bureaucracy's emphasis on strict division of labour, adherence to formal rules and regulations, and impersonal application of rules and controls takes away the individua l employee 's creativity and limits the organisation's ability to respond quickly to an increasingly dynamic environm ent . Ho wever, even in flexible organisations of creative professionals - such as Google, Samsung or Microsoft - some bureaucratic mechanisms are necessary to ensure that resources are used efficiently and effectively. Chris Jordan, Commissioner, ATO ChrisJordanwasappointedas the 12thCommiss ionerof Taxation on 1 January2013.10 This meansheis the'top boss'at theAustralianTaxation Office(ATO). UnlikesimilarCEOpositions, a commissioner is appointedfor a fixedterm of sevenyears- althoughhe is eligiblefor re-appointment. TheATOcantraceits rootsbackto 1910whenthe first commissioner was appointed to collectlandtaxfromlandholders in Australia . ChrisJordanis thefirstpersonwho hascomefromoutsidetheATOto leadit. Asthe newpersonin chargeof theATO,Jordanhasbeenbehindthe introduction of sweeping structuraland culturalchangeswithin the organisation that now employsaround22 000 people.Hesawit asessentialto bringtheATOintothedigitalworldof today.Whenhestarted (remember, this was in 2013),therewasnotevena wayfor members of theAustralianpublic to contacttheATOvia email!ChrisJordanhasalsotakensignificantstepsto reducetheATO's cumbersome bureaucracy in orderto improveits effectiveness andefficiency. Together with his leadership group,andwith inputfromthousands of differentpeoplebelonging to different stakeholder groups,hehasdeveloped a blueprintfor a wayforwardin changing theATOcalled 'Reinventing the ATO'.Theaim is to developa cultureat the ATOthat is 'service-oriented, pragmatic andconscious thattimehasa cost'. TheATOhasnowcreatedappsprovidingreal-timedatato users,in linewith similarappsthat areusedbybanks.ForJordan,it is all aboutgettingtheATOupto speedwith modernsystems . Goingdigital hasalso meanta downsizing of staff numbersas the papertax returnshave declinedandbeenreplacedbye-tax,whichhasresultedin manyjobsdisappearing. Sothere 45 46 Part 1 Introduction havebeensomerumblings withintheorganisation, wheresomestafffindthechanges difficult to handle.Ontheotherhand,therearealsothosewhohaveembraced thechanges . managers WHO to manageme nt MADE Whilehewantsto simplifyandmodernise thetaxsystemforordinarypeopleandsmall-business people,hehasalsosignalled thattheATOwill keepits eyeonmultinationals avoidingtax.He hasalreadyshownthat heis prepared to turnuptheheatoncompanies thataretryingto avoid payingtaxesbyarguingthattheyhavenotax liabilityin Australia.Theyshouldknowthat Chris Jordanstartedhis careerin the NSWpoliceforcebeforehe decidedto go to universityto become a taxexpert.Hestartedhisaccounting careerwithArthurAndersen in 1979,buthewas alsoa seniorlecturerin taxationat Sydney's University of Technology beforeworkingfor KPMG for morethantwo decades, endingupasthechairman of partners for its NSWsection.Hehas alsobeena government adviseranda memberof the Boardof Taxation,beingits chairman beforehetookupthejob ascomm issioner. A DIFFERENCE 4 Describe the important contributio ns made by Frederick W. Taylor and Frank and Lillian Gilbreth to the scientific management school of thinking. 5 Discuss the important contribution made by the general administrati ve theo rists Henri Fayol and Max Weber. 6 Discuss how today's managers use the scie ntific management and general administrative t heories of management. ORGANISATIONAL BEHAVIOUR APPROACH 2.3 LEARN I NG OUTCOME Discuss the develo pment and uses of the organisational be haviour approach. organisational behaviour (OB) A field of study concernedwith the actions(behaviours)of peopleat work. As we know, managers get things done by working with people. This explains why some writers and researchershave chosen to look at management by focusing on the organisation's human resources. The field of study concerned with the actions (behaviours) of people at work is called organisational behaviour (OB). Much of what managers do today when managing people - motivating, leading, building trust, working with a team, managing conflict - has come out of OB research . Earlyadvocates Although there were a number of people in the late 1800s and early 1900s who recognised the importance of the human factor to an organisation's success, four individuals stand out as early advocates of the OB approach. They are Robert Owen, Hugo Munsterberg, Mary Parker Follett and Chester Barnard. Their contributions were varied and distinct, yet they all had in common a belief that people were the most important asset of the organisation and should be managed accordingly. Their ideas provided the foundation for such management practices as employee selection procedures , motivation programs and work teams. Figure 2.3 summarises the most important ideas of these early advocate s. TheHawthorneStudies Hawthorne Studies A seriesof studiesduringthe 1920sand 1930sthat providednew insightsinto individualand groupbehaviour. Without question, the most important contribution to the developing OB field came out of the Hawthorne Studies, a series of studies conducted at the Western Electric Comp any Works in Cicero, Illinois, in the United States. These studies, which started in 1924 and Chapte r 2 Management history • Concerned about deplorable working conditions • Proposed idealistic workplac e • Argued that money spent improving labour was smart investment • Actual manager who thought organisations were social systems that required cooperation • Believed manager's job was to communicate and stimulate employees' high levels of effort • First to argue that organisations were open systems RobertOwen Late 1700s Chester Barnard 1930s • Pioneer in field of industrial psychology - scientific study of people at work • Suggested using psychological tests for employee selection , learning theory concepts for employee training, and study of human behaviour for employee motivation Ear1yadvocates ofOB Mary Parker Follett Early 1900s • One of the first to recognise that organisations could be viewed from perspective of individual and group behaviour • Proposed more people -oriented ideas than scientific management followers • Thought organisations should be based on group ethic FIGURE 2.3 Early advocates of organisational behaviour continued through the early 1930s, were initially designed by Western Electric industrial engineers as a scientific management experiment. They wanted to examine the effect of various illumination levels in the factory on worker productivity. Like any good scientific experiment , control and experimental groups were set up, with the experimental group being exposed to various lighting intensities and the control group working under a constant intensity. If you were one of the industrial engineers in charge of this experiment, what would you have expected to happen? That individua l output in the experimenta l group would be directly related to the intensity of the light? Seems perfectly logical, doesn't it? However, they found that, as the level of light was increased in the experimental group, output for both groups increased. Then, much to the surpr ise of the engineers, as the light level was decreased in the experimental group, productivity continued to increase in both groups. In fact, a productivity decrease was observed in the exper imental group only when the level ofligh t was reduced to that of a moonlit night. What would explain these unexpected results? The engineers were not sure, but concluded that illumina tion intensity was not directly related to group prod uctivity and that something else must have contri bu ted to the results. However, they were not able to pinp oint what that 'something else' was. In 1927 the Western Electric engineers asked the Australian-born and educated Harvard professor Elton Mayo and his associates to join the study as consultants. Thus began a relationship that would last until 1932 and encompass numerous experiments in the redesign of jobs, changes in workday and wo rk-week length, int roduction of rest periods, and individual versus group wage plans. 11 For example, one experiment was designed to evaluate the effect of a group piecework incentive pay system on group productivity . The results indicated that the incentive plan had less effect on a worker's output than did group pressure, acceptance and the accompanying security. The researchers conclud ed that social norms or group standards were the key determinants of individual work behaviour. 47 48 Part 1 Intr odu ct ion to man agem en t Scholars generally agree that the Hawthorne Studies had a dramaticimpact on the direction of management beliefs about the role of people in organisations . Mayo concluded that people's behaviour and attitudes are closely related, that group factors significantly affect individual behaviour, that group standards establish individual worker output, and that money is less a factor in determining output than are group standards, group attitud es and security. These conclusions led to a new emphasis on the human behaviour factor in the management of organisations. Although critics attacked the research procedur es, the analyses of the findings and the conclusion s, it is of little importanc e from a historical perspectiv e whether the Hawthorne Studies were academically sound or their conclusions justified . 12 What is important is that they stimulated an interest in human behaviour in organisations. Thehumanrelationsmovementandbehavioural sciencetheorists human relations movement The belief,for the most part unsubstantiated by research,that a satisfied worker will be productive. behavioural science theorists Psychologist?andsociologistswho relied on scientificmethod for the study of organisational behaviour. Another group within the OB approach is important to man agement history for its unflinching commitment to making management practices more humane. Members of the human relations movement , unsubstantiated by research, uniformly believed in the importance of employee satisfaction - a satisfied worker was believed to be a productive worker. For the most part, the people associated with this movement - for exampl e, Abraham Maslow and Douglas McGregor - were individuals whose views were shaped more by their person al philosophies than by substantive research evidence . (Both of these theorists are discussed more fully in Chapter 17, which deals with the topic of motivation .) On the other hand, some OB researchers relied on the scientifi c method for the study of organisational behaviour . These behavioural science theorists engaged in objective research of human behaviour in organisations. They carefully attempted to keep their personal beliefs out of their work. They sought to develop rigorous research designs that could be replicated by other behavioural scientists. In so doing, they hoped to build a science of organisational behaviour. They included such names as Fiedler, Vroom, Herzberg, Locke, McClelland and Hackman. Their contributions to the understanding of organisational beh aviour will also be covered in later chapters. Howdo today's managersuse the behaviouralapproach? The behavioural approach has largely shaped how toda y's organisations are manag ed . From the way manag ers design motivating jobs , to the way they work with employee teams, to the way they use open communication, we can see elements of the behavioural approa ch. For example, as illustrated in the opening section to this chapter , Bakers Deli ght pays attention to many behavioural issues in how it runs its stores and how these stores operat e to ensure that employe es and franchisees work as a team within each store. Much of what the early OB advocates propo sed , and the conclusions from the Hawthorne Studies, have provided the foundation for our current theories of mo tivation, leader ship, group behaviour and development, and numerous other behavioural topics that we will address fully in later chapters. review questions 7 Describe the contr ibutions of the early advocates of organisational behaviour to, and explain the infl uence of the Hawthorne Studies on, the field of managemen t. 8 Identify how th e human relations and behavioural science theorists differ. 9 Discuss how today's managers use the behavioural approach. 49 Chapter 2 Ma nagement hist or y QUANTITATIVE APPROACH Althou gh passengers bumpin g into one another when trying to find their seats on an airplan e can be a mild annoyance for the people themselves, it is a bigger problem for airlines because the boarding process is backed up, delaying the flight's departure. Based on research in spacetime geometry , one airline introduced a unique boarding process called 'reverse pyramid'. In this scheme , instead of boarding from back to front, or by row order, passengers board simultaneously from back to front and outside (window seats) in, which means window and middle passengers near the back of the plane board first; those with aisle seats near the front are called last. Computer simulations have demon strated that this boarding method tends to minimis e seat and aisle interferenc e during the boarding process, thus resulting in a faster boarding process. 13 This is an example of the quant itat ive approach , which involves the use of quantit ative techniques, such as data collection and mathematical manipulation of that data, to improve decision making . This approach has also been labelled operationsresearch or management science. The quantitative approach evolved out of the development of mathematical and statistical solutions to military problems during the Second World War. After the war, many of the techniques that had been used to solve military problems were applied to the business sector. One group of military officers, nicknamed the 'Whiz Kids', joined the Ford Motor Compan y in the mid-1940s and immediately began using statistical methods and quantitative models to improve decision making in the design and manufacturing of the vehicles that Ford was produ cing. What exactly does the quantit ative approach do? It involves the application of statistics, optimisation and information models, and computer simulations to management activities. Linear programming, for instance, is a technique that managers use to improve resource allocation decisions. Work scheduling can be more efficient as ~ result of critical-path scheduling analysis. Decisions on determining a company 's optimum inventory levels have been significantly influenced by the economic order quantity model. Each of these is an example of quantitative technique s being applied to improve managerial decision making. Another area where quantitative techniques are used frequently is in total quality management . A quality revolution swept through both the business and publi c sectors in the 1980s and 1990s. 14 It was inspired by a small group of quality experts, the most famous being W Edwards D eming and Joseph M. Juran. The ideas and technique s they advocated in the 1950s had few supporters in the United States but were enthusiasti cally embraced by Japanese organisations. As Japane se manufacturer s began beating US competitor s, such as in the car manufacturing industry, in quality compari sons, however, Western mana gers soon took a more serious look at D eming' s and Juran's ideas ... ideas that became the basis for today's quality managem ent programs. Total quality management , or TOM , is a management philosophy devot ed to continu al improvement and responding to customer needs and expectations (see Table 2.3) . The term customerincludes anyone who interacts with the organisation's product or services internall y or ext ernally. It encomp asses employe es and suppliers, as well as the people who purchase the organisation 's goods or services. Continual improvementis not possible without accurate measurement s, whi ch require statistical techniques that measure every critical variable in the organisation 's work proce sses. These measurement s are compared against standards to identify and correct problem s. Howdo today's managersuse the quantitative approach? The quantit ative approach contributes directly to management decision makin g in the areas of plannin g and control. For instance, when managers make budgeting, queuing (as in the LE ARN I NG OUTCOME 2.4 Describe the quantitative approach. quantitative approach Theuse of quantitativetechniquesto improvedecisionmaking. total quality management (TOM) A philosophy of managementdrivenby ~ontinupl improvementand responding to customerneedsand expectations . 50 Part 1 Int rod uction to m anageme nt TABLE2.3 What is quality management? 1. Intense focus on the customer. The customer includes not only outsiders who buy the organisation's products or services, but also internal customers who interact with and serve others in the organisation. 2. Concern for continua/ improvement. Quality management is a commitmen t to never being satisfied. 'Very good' is not good enough. Quality can always be improved. 3. Process focused. Quality management focuses on work processes as the quality of goods and services is continua lly improved . 4. Improvement in the quality of everything the organisation does. Quality management uses a very broad definition of quality. It relates not only to the final product, but also to how the organisation handles deliveries, how rapidly it responds to complaints, how politely the phones are answered, and the like. 5. Accurate measurement. Quality management uses statistical techniques to measure every critical variable in the organi sation 's operations . These are compared against standards to identify problem s, trace them to their roots and eliminate their causes. 6. Empowerment of emp loyees. Quality management involves the people on the line in the improvement process. Teams are widely used in quality management programs as empowerment vehicles for finding and solving problems . __,/ airline boarding examp le m entioned earlier in this section), schedu ling, quality control and similar decision s, they typically rely on quantitative techni ques. The availability of sophisticated computer software pro grams to aid in developing model s, equations and formul as has made the use of quantitative techniqu es somewhat less intimidating for managers, although they must still be able to interpret the results. If you look back at the opening section about Bakers Delight, you should be able to see evidence of how its managers are using various quantitativ e tools to plan and control the operations. For example , a centra lised IT system allows for co mparison and analysis across the stores, and quality management helps to ensure there is a high level of quality in product s and service. The quantit ative approac h, altho ugh important in its own way, has not influ enced management practice as much as the previous one discussed - organisationa l behaviour - for a number of reasons. These include the fact that many managers are unfamiliar with and intimidat ed by quantitat ive tools, behavioural probl ems are more widespread and visible, and it is easier for most students and managers to relate to real, day-to-day people problems than to the more abstract activity of constructing qu antitati ve models. review questions 10 Explain what the quantitative approach has contributed to the field of management. 11 Ident ify what quality management is. 12 Discuss how today's managers use the quantitative approach . CONTEMPORARY APPROACHES 2.5 LEARNING OUTCOME Explain the systems and contingency theories in the contemporary approach . As we have seen, many elements of the earlier approa ches to man ageme nt theory continue to influ ence how manager s manage. Most of these earlier approaches focused on managers' concerns inside the organ isation. Starting in the 1960s, management researchers began to look at what was happening in the external environment outsidethe boundari es of the organisation. Two contemporary management perspectives - systems and contingency - are part of this approach . 51 Chapt er 2 Ma nage men t history Systemstheory Systems theory is a basic theory in the physica l sciences but had never been applied to organised human efforts. In 1938, Chester Barnard, a telephone com pany execut ive, wrote in his book, The Functions efan Executive,that an organisation functioned as a coo perative system. However, it was not until the 1960s that managemen t researc hers began to look more carefully at systems theory and how it related to organisations. A system is a set of int errela ted and interdependent parts arr anged in a manner that produces a unifi ed whole. The two basic types of systems are closed and open. Closed systems are not influ enced by, and do not interact with, their enviro nment. In contrast, open systems dynamically interact with their enviro nm ent. Today, when we describe organisations as systems, we mean open systems. Figure 2.4 shows an organisation from an open systems perspective. As you can see, an organisat ion takes in inputs (resources) from the environment and transforms or processes these resources into outputs that are distribut ed into the environme nt. The organisation is 'open' to, and interacts with, that enviro nm ent . Thesystemsapproachand managers How does the systems approa ch cont ribute to our understa nding of managemen t? Systems researc h ers envisio n ed an organisation as being made up of 'interde pendent factors, including individ uals, groups, attitu des, m otives, formal structure, interactions, goals, status, and authority' . 15 What this means is that as ma nagers coor din ate the work activi ties of the vario us parts of the organisation, they ensure that all these parts are wor king together so that the organi satio n's goals can be achieved . For example , the systems th eory recog nises that, no matter how efficient the production depa rt ment might be, if the marketing department does not anticipate changes in customer tastes and work with the product development department in creat in g products customers want, the o rgani sation's overall performance will suffer. In addition, the systems theory implies that decisions and actions taken in one organ isational area will affect others, and vice versa. For example, if the purchasing departm ent does not acquire the right quantity and qua lity of inputs, the produ ction department will not be able to do its job effectively. ( Environment Organisation 'hnsfonnatfon Inputs --- -'I Raw materials Human resources Capital Technology Information ._- --- process Outputs Employees' work activities Products and services Financial results Information Human results Management activities Technology and operations methods ------ Feedback---- ----- Environment FIGURE2.4 The organisa t io n as an open system -----' system A set of interrelatedandinterdependent partsarrangedin a mannerthat producesa unifiedwhole. closed systems Systems thatare not influencedby, and do not interactwith,theirenvironment. open systems Systems thatinteractwiththeir environment . 52 Part 1 Introduction to management Finally, the systems theory recognises that organisations are not self-contained. They rely on their environments for essential inputs and as outlets to absorb their outputs. No organisation can survive for long if it ignor es government regulations, supplier relations or changes in customers' buying preferences. fWe cover these ex ternal forces in Chapter 3.) How relevant is the systems approach to man ageme nt? Quite relevant. Think, for example, of a shift manager at a local McDonald's outlet who must coordinate the work of employees filling customer orders at the front counter and the drive-through windows , direct the delivery and unloading of food supplies, and address any customer concerns that are raised. This manager 'manages' all parts of the 'system' so that the restaurant meets its daily sales goals. Contingency theory contingency theory A managementtheory that says that organisationsare different,face differentsituations(contingencies)and requiredifferentways of managing. The early manageme nt theorists such as Taylor, Fayol and Weber came up with management principles that they generally assumed to be universally applicable. Howev er, later research found exceptions to many of their principles. For example, division oflabour is valuable and widely used, but jobs can become too specialised. Bur eaucracy is desirable in many situations, but in other circumstances other structural designs are more effective. Manag eme nt is not (and cannot be) based on simplistic principles that can be applied in all situations. Different and changing situations require managers to use different approaches and technique s. The contingency theory (sometimes called the situationaltheory) says that organisations are different , face different situations (contingencies) and require different ways of managing. A good way to describe contingency is 'if, then' . lf this is the way my situation is, then this is the best way for me to manage in this situation. The contingencyapproachand managers A contingency approach to management is intuiti vely logical, because organisations and even units within the same organisation are diverse - in size, goals, work and the like. It would be surprising to find universally applicable management rules that would work in all situations. But, of course, it is one thing to say that the method of managing 'depends on the situation', and another to say what the situation is. Management researchers have been working to identify these 'what' variables. Table 2.4 describes four popular contingency variables. The list is by no means comprehensive - more than 100 different 'what' variables have been identified - but it represents those most widely used and gives you an idea of what we mean by the term contingencyvariable.The primary value of the contingency theor y is that it stresses that there are no simplistic or un iversal rules for managers to follow. TABLE2.4 Popular contingency variables Organisation size. k, size increases, so do the problems of coordination. For instance, the type of organisation structure appropriate for an organisation of 50 000 employees is likely to be inefficient for an organisation of 50 employees . Routineness of task technology. To achieve its purpose, an organisation uses technology . Routine technologies require organisational structures , leadership styles and control systems that differ from those required by customised or non-routine technologies. Environmental uncertainty. The degree of uncertainty caused by environmental changes influences the management process. What works best in a stable and p redictab le environment may be totally inappropriate in a rapidly changing and unpredictable environment. Individual differences . Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity and expectations . These and other individual differences are particular ly important when managers select motivation techniques, leadership styles and job designs. __) [ 53 Chapter 2 Management histo ry 13 Describe an organisation using the systems theory, and discuss how th is approach is appropriate for understanding management. review questions 14 Explain how the contingen cy theory differs from the early theories of management and how it is appropriate for studying management. CURRENTTRENDSANDISSUES Where are we today? What current management concepts and practices are shaping 'tomorrow's history '? In this section, we will attempt to answer those questions by introducing several trends and issues - external environmental influences and changing organisational circumstances - that we believe are changing the way managers do their jobs. Just like the impact of the Industrial Revolution in the 1700s on the emergen ce of management, there are numerous issues and trends that have brought dramatic changes that continue to influence the way organisations are managed. We introduced you to four important trends in Chapter 1 - customer service management, social media, innovation and sustainability. In this chapter , we will now examine some others, including globalisation, workforce diversity, ethics, entrepreneurship , learning organisations and knowledge management, and climate change/ global warming. Throughout the text, many of these themes are extended in various boxes, examples and exercises included in the chapters. Globalisation Managers are no longer constrained by national borders. China, Malaysia, Korea and Thailand have now entered the global car manufacturing market and are building cars in Europe as well as in their home countries . McDona ld's sells hamburgers on every continent except perhaps Antarctica . Danish toymaker Lego Group has opened factories and a distribution centre in the Czech Republic. Swiss company ABB Ltd is constructing power-generating plants in Malaysia, South Korea, China and Indonesia. As these exampl es illustrate, the world has definitely become a global village, leading to important changes in the manager 's job. Globalisation means businesses can hire, source and sell wherever they want. It is increasingly difficult for managers in economically advanced nations such as Australia, where the minimum wage in 2016 is A$17.70 an hour for full- or part-time adult workers, to compete against companies who rely on workers from developing nations, where labour is often available for 40-50 cents an hour. It is not by chance that a good proportion of Australians wear clothes made in China, work on computer s whose parts came from Thailand , and ring up call centres operating from India or the Philippines. In a global economy, jobs tend to flow to places where lower costs provide businesses with a comparative advantage. This 'outsourcing' of jobs, however, has taken a new and unexpected turn, especially for those who think that the movement of jobs to countries with low-cost labour only affects factory workers and callcentre operators. A number of low-cost countries are now graduating 'large numbers of well-educated young people fully qualified to work in an informa tion-based economy ' .16 The service-intensive economies of countries such as Australia and New Zealand are vulnerable to potential outflows of information-based jobs, as has been happening in relation to some of our telecommunications, financial services, airlines, and other organisations that have outsourced various IT and service jobs to places such as India and the Philippines where the labour cost is considerably lower. Such moves have often been widely criticised by both unions and customers. 17 The implication for managers is that they must be prepared to deal with the LE ARNING Ou TC o ME Provide examp les of current trends and issues that are influencing management today . 2 .s 54 Part 1 Introduct ion to man agement difficult task of balancing the interests of their organisation, as it looks for ways to keep costs low and remain comp etitive, with their responsibilities to the communiti es within which they operate. Yes, globalisation can be contro versial, as th ese issues show. R egardless of th ese contro versies, managers in org ani sation s of all sizes and types around th e world have to confront th e challenges of op erating in a global market. 18 Globali sation is such an imp or tant topic that we devote a whole chapt er to it (Chapter 4) and int egrate discussion of its imp act on th e variou s management fun ctions through out th e text. A numb er of our chapt er-op enin g manager dilemma s, end-of-chapt er cases and chapt er exampl es featur e global managers and or ganisations. Robots in the workplace Whilethis text presentsa fairly accuratedescription of today's workplac e, youare goingto 19 spendmostof yourworklife in thefuture. Whatwill thatworklife looklike?Howwill it be differentfromtoday?Theworkplaceof tomorrowis likelyto includeworkersthat arefaster, smarter,moreresponsible - andwhojust happento be robots!Areyouat all surprised bythis statement? Althoughrobotshavebeenusedin factoryandindustrialsettingsfor a longtime, it is becoming morecommon to findrobotsin the office,andit is bringingaboutnewwaysof lookingat howworkis doneandat whatandhowmanage rs manage . Sowhatwouldthe manager' s job be like managing robots?Andevenmoreintriguing is how these'workers'mightaffecthow humanco-workers interactwith them. As machine s have become smarter , researchers havebeenlookingat human-machine interaction andhowpeople interactwith the smartdevicesthat are now suchan integralpart of our profes sionaland personallives. Oneconclusion is that peoplefindit easyto bondwith a robot,evenonethat doesnot lookor soundanythinglike a realperson . In a workplacesetting,if a robotmoves aroundin a 'purposeful way', peopletendto viewit, in someways,asa co-worker . Peoplename theirrobotsandcanevendescribe therobot'smoodsandtendenc ies. Thereis no doubtthat robottechnology will continueto be incorporated into organisat ional settings . Themanager 's job will becomeevenmoreexcitingandchallengingas humansand machines worktogethe r to accomp lish an organi sation's goals. But is it still managing when whatyouaremanaging arerobots? If you hadto 'manage ' peopleandrobots,how do youthinkyourjob as managermightbe different?Arethereanyethicalissuesinvolvedin replacing jobs(people)with robots?What doyouthink? Workforcediversity workforce diversity Thewaysin which peoplein an organisationare differentfrom and similarto one another. Anoth er issue facing managers in the 21st century will be coo rdin ating work effor ts of diverse organisational m emb ers in accomplishing organisational goals. Today's organisations are characterised by workforce diversity - a workfor ce that is more hete rogeneous in term s of gender, race, ethni city, age and other characteri stics that reflect differences. H ow diverse is the Australian workfor ce? Accordin g to data from the Australian Bureau of Statistics, in 2016 the Australian labour force compri sed nearly 12.7 million individuals, of whom almo st a third were born overseas.20 Australian society is made up of individuals Chapter 2 Management history who come from more than 200 countries from all parts of the globe. This diversity continues to enrich our country. As well as contributing to population growth , overseas migration - in particular, skilled migration - is vital in overcoming skill deficits and the ageing of Australia's workforce . Smart managers recognise that diversity can be an asset because it brings a broad range of viewpoints and problem-solving skills to a company. 21 There has been some intense public debate in recent years in relation to Australia's future population .22 Should we maintain the population growth at a relatively modest level, or should we aim for a massive growth with a total popu lation of 50 million in 2050? Some argue that greater numbers of immigrants should be encouraged in order to counter the effect of the ageing Australian population. Such population growth would also generate a wider growth in our economy, stimulating business growth. Others insist that Australia has already exceeded the number of inhabitants that can be sustainable in the long term, given the frequency of droughts and the country's limited water resources together with the threats posed by climate change . Does the fact that workforce diversity is a current issue facing managers mean that organisations were not diverse before? No. They were, but diverse individuals made up a small percentage of the workforce, and so organisations, for the most part, ignored the issue. Prior to the early 1980s, people took a 'melting-pot' approach to differences in organisations. It was assumed that people who were 'different' would automatically want to assimilate. But it is now recognised that employees do not set aside their cultural values and lifestyle preferences when they come to work. The challenge for managers, therefore , is to make their organisations more accommodating to diverse groups of people by addressing different lifestyles, family needs and work styles. The melting-pot assumption has been replaced by the recognition and celebration of differences. 23 There are many areas where specific workforce diversity programs may be needed in Australia, New Zealand and other countries. The Diversity Council of Australia and the EEO Trust in New Zealand highlight areas such as gender (women), migrants, disability, youth / mature aged and Indigenous people as areas where organisations can aim to make more progress in the facilitation of greater employment opportunities for disadvantaged or marginalised groups in our societies. 24 We highlight many diversity-related issues, and how organisations are responding to those issues, throughout this text in our 'Managing workforce diversity and inclusion' boxes. Ethics There have been numerous examples in recent years of unethical behaviour, corporate lying, bribery, misrepresentation and financial manipulation. What has happened to managerial ethics? Ethical behaviour seems to have been forgotten or ignored as these individuals and managers put their self-interest ahead of others who might be affected by their decisions. For example , Simon Longstaff, executive director of Sydney's St James Ethics Centre , an independent Australian organisation that provides ethics services to individuals and organisations, maintains that the root cause of the Global Financial Crisis w~s not a failure of regulations in the financial services industry, but poor ethics. 25 His view is that the triggers for the crisis - the initial decisions in the United States to lend money to people who were unlikely to be able to repay loans, and then to rate these subprime mortgages as investment-grade assets - were unethical. Although the investigations into the behaviour and practices of the financial companies on Wall Street have been one of the most widely publicised corporate ethics crises in recent years, executives at a number of other companies around the world - including Australia - have also been engaging in similar kinds of unethical action s, where many investors have lost money or employees have lost jobs. The prison sentences and fines imposed on these and other unethical corporate 55 56 Part 1 Int roduction to m ana ge me nt manager s and directors can be seen as an attemp t to send some powerful messages to the corporate world that disho nesty and breach of fiduciary duties will not be tolerated. It is also clear from the court cases in Australia, the United States and the rest of the world that there is now a strong political and regulatory commitm ent to pur suing corporat e crime and pun ishing white-collar crimina ls in a more serious way.26 Although most managers continue to behave in a highly ethical manner, the ethical abuses that are so widely publicised indicate a need to 'upgrad e' ethical standards. This is being addressed at two levels. First, ethics education is being widely emphasi sed in university curricula . Second, organisations themselves are taking a more active role in creating and using codes of ethics, provi ding ethics training program s and hiring ethics officers, which will be discussed further in C hapter 5. We also want to prepare you to deal with the ethical dilemmas you are likely to face. T herefore, we have included a 'Thinkin g criti cally about ethics' box and an end - of-cha pter ethical dilemma in almost every chapter . Entrepreneurship entrepreneurship Theprocessof startingnew businesses, generallyin responseto opportunities. Entr epreneur ship is an importan t global activity.27 But what exactly is it ? Entrepreneurship is the process of starting new businesses, gen erally in respons e to opportunities. Entrepreneurs are pursu ing opportuni ties by changing , revolution ising, transforming, or introducing new products or services or new ways of doing busines s. For example, Jeff Bezos, found er of Amazon.com , was a successful programmer at an investment firm on Wall Street in th e mid-1990s. However, statistics on the explosive growth in the use of the internet (at that time, it was growing by about 2300 per cent a month) kept nagging at him. He decided to quit his job and pursue what he felt were going to be enormous on line retailing opport unitie s. Today, you can buy books, music, cars, furniture ,jew ellery and numerous other items on Amazon. Many peo ple think that entrepreneurial ventures and smallbusiness are one and the same, but they are not. Some key differences distinguish the two. Entrepreneur s create entrepre neurial ventures - that is, organisations that pursue opport unitie s, are characterised by innovativ e practic es, and have growt h and profitability as their main goals. On the other hand, a small business is one that is inde pendentl y owned, opera ted and financ ed; has fewer than 20 employees; does not necessarily engage in any new or innovative practices; and has relatively little impact on its industry. A small business is not ne cessarily entrepreneur ial because it is small. To be entrepreneurial means that the business must be innovative, seeking out new opportunities . Even tho ugh entrepreneuria l ventures may start small, they pursue growth. Some new small firms may grow, but many remain small, by choice or by default. Entrepreneurship does not have to be about a new and innovative product; frequently, it is about innovat ive business systems or metho ds. For exampl e, by developin g and using more soph isticated informat ion system techno logy, organisation s can make con siderable savings in forecasting and rostering staff, thereby lowering labour costs; or they can develop more efficient inventory control systems, resulting in lower warehou sing costs. Then there is the possibility of a retail operat ion increasing sales by utilising an internet site to reach a larger group of po tential customers beyond what a single local outlet could do. Or it can be about using viral marketi ng on Facebook, lnstagram , Twitter and YouTube to spread the word about the company 's products . Entrepreneurship will con tinue to be important to societies around the world. Both for-profit and not-for-profit organisations will need to be entrepren eurial - that is, purs uing opportuni ties, innovatio ns and growth - if they want to be successful. The topic of entrepreneurs hip is visited again in Chapter s 5 and 7. However , you will find elements of entrepreneurship in many of the boxes and case studies presented in this text , as it is one of the critical aspects of management. Chapter 2 Management TABLE2.5 Learning organisations versus traditional 57 history organi sations Traditional organisations Learning organisations Att itu de towards change If it is working, don't change it If you are not changing, it won't be working for long Attitude towards new ideas If it wasn't invented here, reject it If it was invented or reinvented here, reject it Who's responsible for innovation ? Traditional areas such as R&D Everyone in the organ isation Main fear Making mistakes Not learning , not adaptin g Comp etiti ve advantage Products and service Ability to learn, knowledg e and expert ise Manager's jo b To control others To enable other s j Learningorganisations andknowledgemanagement Today 's managers confront an environment in which knowledge creation and change take place at an unprecedented rate . As a result, many past management approaches and principles - created for a world that was more stable and predictable - no longer apply. Today's organisations must be able to learn and respond quickly. These organisations will be led by manager s who can effectively challenge convention al wisdom , manage the organisation's knowledge base and make needed changes. These organisations will need to be learning organisations - that is, ones that have developed the capacity to learn, adapt and change continuously. Table 2.5 clarifies how a learning organisation is different from a traditional organisation. Part of a manager's re ponsibility is to create learning capabilitie s throughout the organisation - from lowest level to highest level and in all areas. How? An important step is understanding the value of knowl edge as an important resource, just like cash, raw materials or office equipment. To illustrate the value of knowl edge, think about how you register for univer sity subje cts. Do you talk to others who have had a certain lecturer or professor? Do you listen to their experiences with this individual and make your decision based on what they have to say (their knowledge about the situation)? If you do, you are tapping into the value of knowl edge. But in an organisation, just recognising the value of accumulated knowledge or wisdom is not enough. Managers must deliberately manage that base of knowl edge. Knowledge management involves cultivating a learning culture where organi sation al members systematic ally gather knowledge and share it with others in the organi sation so as to achieve better performance. 28 For instance, accountants and consult ants at Ernst & Young , a profe ssional services firm, document best practices they have developed, unusual problem s they have dealt with and other work information . This 'knowledge ' is then shared with all emplo yees through computer-based applications and teams that meet regularly throughout the compan y. Many other organisation s - for exampl e, General Electric, Toyota, NRMA, H ewlett-Packard and the Australian Public Service - have recognised the importance of knowledge managem ent to being a learning organisation . Climatechange/globalwarming Over the past decade in Australia, there has been increasing concern about the availability of water for agriculture, farming and human consumption. We have been through what is probably the longest drought since the start of Europ ean settlement in this country . We have also experi enced one of the most devastating bushfires in modern history in the state of Victoria in February 2009, and terrible bushfires in October 2013 in the NSW Blue Mountain s, well learning organisations Organisationsthat havedevelopedthe capacityto learn,adaptand change continuously. knowledge management Cultivatinga learningculturewhere organisationalmemberssystematically gather knowledgeandshareit with othersin the organisationso as to achievebetterperformance. 58 Part 1 Introduction to management before the normal bushfire season. In August 2010, we watched in horror as massive floods in Pakistan caused loss of life and economic and social destruction on a scale that is beyond comprehension. This was then followed by the worst flooding in recent Australian history in large areas of Queensland and northeast Victoria in January 2011, which also resulted in a number of fatalities as well as having major economic, social and political impacts. For a considerable time, concern has grown over climate change / global warming and the need to find new methods of producing energy that will not produce greenhouse gases. It has become apparent to almost every industry and business that it needs to operate in a way that conserves water and other resources and reduces its dependency on energy, particularly energy produced from fossil fuels. Of course, this is not just an Australian concern; it is a worldwide problem. Traditionally, businesses have assessed their performance against one bottom line - the financial one - their profitability. However, in the last few decades many businesses have moved beyond this and started to assess their performance against three bottom lines environmental, social and economic. Initially, this was seen mainly as a marketing or public relations activity designed to impress their stakeholders. But some of the organisations that followed this approach discovered that waste reduction, energy efficiency, pollution prevention and a better social engagement with the communities in which they oper ated actually made economic sense.29 Combined with the increasing awareness of climate change, world poverty, and water and energy scarcity, many organisations are now starting to understand that they need to change the way they operate. Thus, there is now a need to integrate environmental, social and economic considerations into every aspect of the organisation's business practices, which will result in more sustainable ways of operating. Global pressures 30 Thetotal world populationin 2017is estimatedat 7.5 billion individuals. However,that numberisforecasted to reach9.7 billionby2050,at whichpointtheUnitedNationspredictsthe total population will eitherstabiliseor peakaftergrowingfor centuriesat anever-accelerating rate.Themainreasonfor this majorshift is the declinein birth ratesas nationsadvance economically. However,in developing countriesin Africa,Asia,LatinAmerica,the Caribbean andOceania, birthratesremainhigh. Oneof the disturbingfactsis that the world'spopulationusesthe Earth'sresources at a rate nearlyone-and-a-half timesfasterthannaturecanreplaceessential'services'suchas clean water,cleanair,arableland,healthyfisheries,andthe stableclimateonwhichall businesses andsocietiesdepend.If the populationclimbsfrom7.5to 9.7billionpeopleby2050and,even moreimportantly, ourincreasingly high-consumption globaleconomy continues to grow,howdo we reversethisdeclinebeforeit becomes a suddencatastrophe? It is crucialto understand that the longerwe continueto consume moreresources thanthe Earthcansustainably provide,the lessabletheplanetwill beto meetourresource needsin thefuture.Climatechangeandglobal warmingwill alsoaddto thestrainontheplanet'sabilityto supportits growingpopulation . This alsoappliesto Australia,wherea predictedpopulationof around36 millionpeoplein 2050is expected to putan immense strainonthe environment. Thesimpleconclusion is thatwe mustaddressbothpopulation growthandourconsumption of the Earth'sresources. Buthowdowe reducepopulation growth,andhowcanwe geteveryone to consumelessand learnto useresources far moreproductively? Generally, the discussion sofar hasbeenmuted.Buttheseissuesneedto beaddressed bothin Australiaandglobally. 59 Chapter 2 Management history How sustainable management is actually put into action continues to evolve and change. In the past, many organisations proclaimed they were aiming to become more sustainable by doing relatively simple things such as recycling office paper, or increasing the use of recycled materials in products or packaging. Today, organisations have started to use energy, water and materials more efficiently, and to take other actions that reduce emissions and save money. However, given the systemic nature of the world's environment al, social and economic problem s, there is a need to create even more balanced and sustainable outcomes . Tomorrow's successful organisations will be those that are prepared to use innovative technologi es and radically re-engineered business models where sustainability is not seen just as a sideline ethical consideration, but as a path to profits. The leading edge of sustainable management is now moving beyond savingmoney to makingmoney. In the leading organisations, sustainability is seen as a means of creating new business value that will result in increased sales, new and innovative products and services, and expanded markets. Sustainable management is also seen as a way to reduce risk, enhance brand value and customer loyalty, and attract and retain employees.31 It is for this reason that we have included 'Managing for sustainability' boxes that show case business activities where higher-than-normal sustainable management has been achieved. Finally, it can be said that, in this time of uncertainty, the business sector is about to enter a 'New Industrial Revolution ' not unlike the one it und erwent in the late 18th century, as described at the beginning of this chapter. The previous Industrial Revolution gave rise to mass production and the development of large corporations, which generated an unpr ecedented era of economi c growth . This growth has also been intimately linked to the rapid expansion in use of fossil fuels. The 'New Indu strial Revolution ' will be led by organisations that are able to apply sustainable management practices in order to gain a competitive advantage from fundamental changes in both production design and technology that better satisfy their customers' needs, increase profits, and help to solve environment al and social problems all at the same time. The threat of global warming and climate change is a problem that calls for new thinking and more innovative management approaches. It will require real change, because business-as-usual is no longer an option that the world can pursue as it tries to deal with this enormous challenge of the 21st cent ury. 15 Discuss how the two trends of globalisation and workforce diversity impact on organisations and managers. 16 Identify the importance of ethics and entrepreneurship in today's organisations. 17 Describe why learning organisations and knowledge management, as well as climate change/g lobal warming, have become impo rtant issues for today's managers. BHP's 6-Star Green office development in its tenancy at Brookfield Place, Perth, has been designed not just with sustainabilit y in mind, but also to create open, modern and flexible workspaces that aim to encourage higher product ivity among emp loyees. Courtesyof Brookfield. review questions 60 Part 1 Introduction to management Learning summary Learning outcome 2. 1: Provide some examples of early management practice. Studying history is important because it helps us see the origins of today's management practices and identify what has and has not worked. We can see early examples of management practice in the construction of the Egyptian pyramids and in the arsenal of Venice. One important historical event was the publication of Adam Smith's The Wealth of Nations, in which he argued the benefits of division of labour Qob specialisation). Another was the Industrial Revolution, where it became more economical to manufacture in factories than at home. Managers were needed to manage these factories, and these managers needed formal management theories to guide them. Learning outcome 2.2: Discuss the important contributions administrative theorists within the classical approach . of scientific management and general Frederick W. Taylor, known as the 'father' of scientific management, studied manual work using scientific principles - that is, guidelines for improving production efficiency - to find the 'one best way' to do those jobs . His four principles were: (1) use scientific methods to find the best way to do a job; (2) scientifically select, train and develop the workers; (3) ensure cooperation from the workers by offering incentives; and (4) allocate work and responsibilities to workers and managers. The Gilbreths' primary contribution was finding efficient hand-and-body motions and designing proper tools and equipment for optimising work performance. Fayol believed that the functions of management were common to all business endeavours but also were distinct from other business functions. He developed 14 principles of management from which many current management concepts have evolved. Weber described an ideal type of organisation, which he called a 'bureaucracy', as having characteristics that many of today's large organisations still have. Today's managers use the concepts of scientific management when they analyse basic work tasks to be performed, use time-and-motion studies to eliminate wasted motions , hire the best-qualified workers for a job , and design incentive systems based on output . They also use the concepts of general administrative theory when they perform the functions of management and structure their organisations so that resources are used efficiently and effectively. Learning outcome 2.3: Discussthe development and uses of the organisational behaviour approach. The early 0B advocates (Robert Owen, Hugo Munsterberg, Mary Parker Follett and Chester Barnard) contributed various ideas, but all believed that people were the most important asset of the organisation and should be managed accordingly . The Hawthorne Studies, which started as a scientific management experiment , dramatically impacted management beliefs about the role of people in organisations, leading to a new emphasis on the human behaviour factor in managing . The organisational behaviour approach has largely shaped how today's organisations are managed . Many current theories of motivation , leadership, group behaviour and development , and other behavioural issues can be traced to the early 0B advocates, the Hawthorne Studies , and the contributions from human relations and behavioural scientists . Learning outcome 2.4: Describe the quantitative approach . The quantitative approach involves applications of statistics, optimisation models, information models and computer simulations to management activities. Total quality management is a management philosophy devoted to continual improvement and responding to customer needs and expectations. Today's managers use the quantitative approach especially when making decisions as they plan and control work activities such as allocating resources,improving quality, scheduling work or determining optimum inventory levels. Learning outcome 2 .5: Explain the systems and contingency theories in the contemporary approach. The systems theory says that an organisation takes in inputs (resources) from the environment and transforms or processes these resources into outputs that are distributed into the environment. It helps us to understand management, since managers must ensure that all the interdependent units are working together in order to achieve the organisation 's goals; it helps managers to realise that decisions and actions taken in one organisational area will affect others; and it helps managers to recognise that organisations are not self-contained, but instead rely on their environment for essential inputs and as outlets to absorb their outputs. I Chapter 2 Management history The contingency theory says that organisations are different, face different situations and require different ways of managing . It helps us to understand management, because it stresses that there are no simplistic or universal rules for managers to follow. Instead, managers must look at their situation and determine that, if this is the way my situation is, then this is the best way for me to manage. Learning outcome 2.6: Provide examples of current trends and issues that are influencing management today. Many changes have taken place during the early part of the 21 st century that are directly affecting the practice of management. Globalisation , workforce diversity , ethics, entrepreneurship, learning organisations and knowledge management, and climate change/glo bal warming are all examples of current trends and issues that are influencing today's managers. Just like the impact of the Industrial Revolution in the late 18th century on the emergence of management , today's trends and issues continue to influence and change the way organisations are managed. Thinkingcriticallyaboutmanagementissues 1 Explain why studying management history is important. 2 What kind of workplace would Frederick W.Taylor create? Henri Fayol? Mary Parker Follett? 3 Why were the Hawthorne Studies so critical to management history? 4 Can a mathematical (quantitative) technique help a manager solve a 'people' problem , such as how to motivate employees or how to distribute work equitab ly? Explain. 5 Continual improvement is a cornerstone of TQM. Is continual improvement possible? What challenges do organisations face in searching for ways to continually improve? How can managers deal with those challenges? 6 7 How do systems theory and the contingency approach make managers better at what they do? How do societal trends and issues influence the practice of management? What are the implications for someone studying management? Becominga manager What are some of the action steps that you can take to prepare yourself better for becoming a manager? Choose two non-management classes that you are currently enrolled in or have taken previously . Describe three ideas and concepts from those subject areas that might help you be a better manager. Choose an organisation with which you are familiar and describe the job specialisation used there . Is it efficient and effective? Why or why not? How could it be improved? Can scientific management principles help you be more efficient? Choose a task that you do regularly (such as laundry, fixing dinner, grocery shopping , studying for exams, etc.). Analyse it by writing down the steps involved in completing that task. See if there are activities that could be combined or eliminated. Find the 'one best way' to do this task! And the next time you have to do the task, try the scientifically managed way! See if you become more efficient (keeping in mind that it is not easy to change old habits). How do business organisations survive for 100 years? Obvious ly, they have seen a lot of historical events come and go! Choose one of the following companies and research its history : Telstra, Coca-Cola, BHP Billiton, National Australia Bank or the Foster's Group. How has it changed over the years? From your research on this company, what did you learn that could help you be a better manager? Pay attention to current business stories and how they relate to any of the six approaches to management. If you are working , try also to note which of the six approaches to management you are using and how they are helping you to do your job. Describe briefly three things you have learned in this chapter about being a good manager. 61 62 Part 1 Introduction to management PERSONALINVENTORY ASSESSMENTS Innovation attitude scale Entrepreneurs are able to use innov ative approac hes to d evelop new products or services. In this PIA, you will see how you rate in relation to how innovative yo u perce ive yourself to be. Ethical dilemma Ethics and corporate governance have been raised in this chapter as one of the current management concepts that organisations and managers will have to face. Occasionally, the facts that the manager must communicate and explain are not particularly flattering to the organisat ion . This presents the dilemma of whether or not it is unethical to tell a lie. Consider the following case. A senior financial manager is reviewing the company's financial performance for the previous year at the annual shareholders' meeting. The news is not bad, but costs may blow out in the next and subsequent years as the company has done nothing about sustainable management. As a wild guess, the manager considers that issues such as water, fuel and transport costs may double in the short term, pushing up overall costs by 15 per cent. One of the shareholders stands up and asks the manager, 'Has the company taken any action to introduce sustainable management? What action has the company taken to offset any risks or cost increases due to climate change/global warming ?' The manager knows that the senior management has chosen to ignore this issue in the hope that it will either go away or prove to be a storm in a teacup. However, she also knows that is not what her management colleagues want her to say. Further, she personally believes that the risks or costs associated with climate change/global warming will increase - and continue to increase - if sustainable management practices are not introduced. She also recognises that the shareholders would like to hear that the company is well on the way to adopting more sustainable practices. Should this manager lie? Explain your reasoning. What would you do if you were this manager? What ethical guidelines could you give to someone faced with this type of situation? CASE APPLICATION The rise and fall of Ford Australia Fordwas oneof the earliestcompanies to makecars,starting in 1893whenHenryFordsuccessfullybuilt hisfirst car-buggy .32 However , HenryFordhad ambitions to build a motorcarthat would be affordable for a great numberof people,which he believedcould be achievedby changing the way cars were being manufactured . He decidedto use a movingassemb ly line, insteadof makingcars one at a time by hand.Before the adoptionof this revolutionarymethod,it took an average of 12 hoursand 20 minutesto assemblea chassis.By 1914, this time had beenreducedto 1 hourand 33 minutesthrough various innovativeimprovements . These improvementshad beenidentifiedthroughobservation of workersandthe analysis of statistical measuresof workerproductiv ity. Otherefficiency improvements were also graduallybuilt into the assembly line so by the time the last of morethan 15 million ModelT automo biles was built in 1927,the companywas produc ing a carevery24 seconds! Fordcameto Australiain 1904,but it was not until 1925 that it startedlocalmanufacturing at its first factoryat Geelong, Victoria.At first, importedcomponent s were assembled,but in 1958co~structionstartedon a new factory in the outer Melbournesuburbof Broadmeadows, andthe first AustralianmadeFalconrolledoff the assembly line in June1960. To remaincompetitive,it is importantfor a companyto changewith thetimes.Overtheyears,Fordmademanychanges to its managemen t approaches andmanufacturing technolog ies Chapter 2 Management history in orderto remaincompetitive . In the 1980s,managersand manufacturing in Australiawasits uncompetitive manufacturing engineers at Ford'soperationsin Australiabegana processto costs,whichweredoublethosein Europeandnearlyfourtimes improve thequalityof itsvehiclesbychanging theorganisational thosein Asia,resulting in a $600millionlossfor FordAustralia culture and activities related to design, manufactureand overthe previousfiveyears. Anotherfactorcontributing to the assemb ly of their cars.Forexample, FordAustraliaredesig ned closurewasthe fall in salesof FordFalcons, downfromnearly jobsandaddedqualityinspection,as well as introducing total 56000in 2002to just over14000in 2012. qualitymethodssuchas the use of statisticalmeasures, to Shortlyafter Forddecidedto closeits manufacturing, both improvethe work of the assemblyline operators . By usinga HoldenandToyotaannounced that they,too,wouldclosedown moreparticipative management approach,the companythat their manufacturing operatio ns in Australiaat the endof 2017. wasat thattimeemploying around5000peoplewasalsoableto All threecarmanufacturers hadfor a numberof yearsreceived generategreaterinvolvement of its Australianemployees in the financialsupportfromthe Australiangovernment (around$500 designandcontrolof their ownwork.Management understood milliona year). But whenthe government announced in 2013 that,froma competitive pointof view,it wasnecessaryfor Ford that it was not preparedto continueits financialsupport,the Australia to be ableto producevehiclesthat wereworldclass decisions to closewereinevitable . Thesimplefactwasthatthe in termsof designquality,freedomfrom qualitydefectsand car industryin a small,high-cost countrylike Australiacould valuefor money . At this time, the assemblylinessaw around not matchthe globalmanufacturer s' high-volume andlow-cost 100000carsrollingout eachyear. However , makinga world- production . classproductin Australiawas not enoughon its own in an increasingly compe titive market. Discussionquestions With a globalisedcar manufacturing industryemergingas HowhasFordusedthe principles of scientific management tradebarrierswere comingdown,Forddecidedto introducea in its operation s? globalmanufacturing strategy. Newcarmodelsfor eachregion beenusedin improving wouldusea smallernumberof standardglobalplatformsupon 2 Howhasthequantitativeapproach the operations at Ford Australia? whichthevariouscarmodelsin Ford'svastproductrangewould behaviour approach been be built. Unfortunate ly, evenif FordAustraliahas long been 3 Howhasthe organisational usefulin improving FordAustralia'soperation s? regardedas a strongperformerwithin the globalFordempire in termsof productdevelopment and design,FordAustralia's 4 UsingFigure2.4(page51). howwouldyoudescribeFord asanopensystem? Whatwerethefactorsin thissystems manufacturingoperations didnotfit in with Ford'sglobalplans. modelthat madeForddecideto closeits manufacturing In May 2013, the long-feared announcementcame: operations in Australia? FordAustraliawas going to close its productionlines in theoryalsooffersomeinsightsinto Broadmeadows andGeelongin October2016after 88 yearsof 5 Doesthecontingency whatfactorsmayhaveinfluenced variousmanagement producingmorethan 6 millioncarsin Australia . Theclosures decisions at FordAustralia?If so,howandwhy? would affect approximately1200 workers. However,Ford wouldcontinueto employmorethan 1500peoplein Australia 6 Haveanyof the currenttrendsor issuesinfluenced in researchand development and dealerships, evenafter the decisionmakingandmanagement at FordAustralia?If so, closureof its manufacturing . Onereasonfor theclosureof Ford's whatarethey? Endnotes 1. Thisopening section is basedoninformation fromBakers Delight 's website, <www.bakersdelight.com.au>, 21 July2016;G.Korporaal , 'Lesley andRogerGillespie takeBakers Delight to Canada andNew Zealand ', The AustralianOnline- The Deal Magazine, 19 September 2014;A. Kohler, 'Bakers Delight turnsdowntakeover bid', TheAustralianOnline,1 May2014;aninterview withH.Gerry Gerrard , General Manager Bakers Delight , 15 October 2013; andAAP. 'Bakers Delight exceeds franchisee forecasts, saysCEOGillespie ', The AustralianOnline,28 December 2011. 2. C.S.George, Jr, The Historyof ManagementThought , 2ndedn (Englewood Cliffs , NJ:Prentice Hall, 1972), p. 4. 3. Ibid,pp.3!">-41. 4. F.W . Taylor, Principlesof ScientificManagement(NewYork: Harper , 1911),p. 44. Forotherinformation onF.W . Taylor, see 63 64 Part 1 Introduction to management S.Wagner-Tsukamoto, 'Aninstitutionaleconomicreconstruction of scientificmanagement: Onthe losttheoreticallogicof Taylorism', Academy of Management Review, January2007, pp. 105-17; M.Banta,Taylored Lives: Narrative Productions in the Age of Taylor, Veblen, and Ford (Chicago: Universityof Chicago Press, 1993);andR.Kanigel,The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (NewYork:Viking,1997). 5. See,for example,F.B.Gilbreth,Motion Study (NewYork:Van Nostrand,1911);andF.B.GilbrethandL.M.Gilbreth,Fatigue Study (NewYork:SturgisandWalton,1916). 6. 'Managingfrom a globalperspective'boxbasedon informationfrom McDonald's website,<www.mcdonalds.com>, 28 November 2016; R.L.BellandJ.SMartin,'The practicalusesof two classic management theoriesin everydaymanagerial communication situations:Taylor'sscientificmanagement andAdams'equitytheory', Proceedings of the 76th Annual Convention of the Association for Business Communication , Montreal,Quebec, Canada,19-22 October2011. 7. G.Colvin,'Managingin the infoera', Fortune, 6 March2000,pp. F6-F9;andA. Harrington,'Thebig ideas', Fortune, 22 November 1999,pp. 152-3. 8. H. Fayol,Industrial and General Administration (Paris:Dunod, 1916). 9. M.Weber,The Theory of Social and Economic Organizations , ed.T.Parsons, trans.A.M.Henderson andT.Parsons(NewYork:The FreePress,1947);andM.Lounsbury andE.J.Carberry, 'Fromkingto courtjester?Weber'sfall fromgracein organizational theory', Organization Studies, Vol.26, No.4, 2005,pp. 501-25. 10. 'Managers whomadea difference'boxbasedon ATO,'Reinventing the ATO:Programblueprint',March2015;S.Benson,'ATO'sglobaltax hunt:Multinationals underscrutinyfor minimisation schemes' , The Daily Telegraph Online, 8 December 2014;'DrillingdownwithChris Jordan' , Public Accountant Online, 9 October2013;L. Dugdale, 'ATOCommissioner ChrisJordan'sviewfromthe top', INTHEBLACK, 2 August2013;andS.Moran,'ATOpoisedfor an overhaul' , The Australian Online, 2 July2013. 11. E.Mayo,The Human Problems of an Industrial Civilization (NewYork:Macmillan, 1933);andF.J.Roethlisbe rger andW.J.Dickson, Management and the Worker (Cambridge, MA:HarvardUniversity Press,1939). 12. See,for example,G.W. Yunker,'Anexplanation of positiveandnegative Hawthorne effects:Evidence fromthe relayassembly test roomand bankwiringobservationroomstudies', paperpresentedat the Academy of Management AnnualMeeting,August1993,Atlanta,GA; S.R.Jones,'Wastherea Hawthorne effect?', American Sociological Review, November 1992,pp.451--68;S.R.G. Jones,'Worker interdependence andoutput:TheHawthorne Studiesre-evaluated ', American Sociological Review, April 1990,pp. 176-90; J.A.Sonnenfeld, 'Sheddinglight on the Hawthorne Studies',Journal of Occupational Behavior, April 1985,pp. 111-30; B.Rice,'The Hawthorne defect:Persistence of a flawedtheory',Psychology Today, February1982,pp.70--4;R.H.FrankeandJ.Kaul,'The Hawthorne experiments: Firststatisticalinterpretations' , American Sociological Review, October1978,pp.623-43; andA. Carey,'The Hawthorne Studies:A radicalcriticism',American Sociological Review, June1967, pp.403-16. 13. N.Zamiska,'Planegeometry:Scientistshelpspeedboardingof aircraft', The Wall Street Journal, 2 November 2005,pp.A1+. 14. See,for example,J.R.Hackman and R. Wageman, 'Totalquality management: Empirical,conceptual , and practicalissues', Administrative Science Quarterly, June1995, pp. 309-42; T.C.Powell,'Totalqualitymanagement as competitiveadvantage :A reviewand empiricalstudy', Strategic Management Journal, January1995, pp. 15-37; R.K.Reger,LT. Gustafson,S.M.Demarie andJ.V.Mullane,'Reframingthe organization:Whyimplementing total quality is easiersaidthan done', Academy of Management Review, July1994, pp. 565-84; C.A.Reevesand D.A.Bednar, 'Definingquality:Alternativesand implications',Academy of Management Review, July1994, pp. 419-45; J.W.Dean,Jrand D.E.Bowen,'Management theoryand total quality:Improving researchand practicethroughtheory development' , Academy of Management Review, July1994, pp. 392-418; andA. Gabor,The Man Who Discovered Quality (NewYork:RandomHouse,1990). 15. S.Haines,'Becomea strategicthinker', Training, October/November 2009,p. 64; andK.B.DeGreene, Sociotechnical Systems: Factors in Analysis, Design, and Management (Englewood Cliffs,NJ: PrenticeHall,1973),p. 13. 16. G.Colvin,'Americaisn't ready',Fortune, 25 July2005,p. 72. 17. L. Mcllveen,'St Georgedraggin'jobs offshore', The Daily Telegraph, 2 October2006,p. 13. 18. J.E.Garten,'Globalismwithouttears', Strategy & Business, Fourth Quarter2002, pp. 36-45; L.L.Bierema,J.W.BingandT.J.Carter,'The globalpendulum',Training and Development, May2002, pp. 70-8; C.Taylor,'Whateverhappenedto globalisation? ' , Fast Company, September1999,pp. 228-36; and S.Zahra,'The changingrulesof globalcompetitiveness in the 21st century', Academy of Management Executive, February1999, pp. 36-42. 19. 'Thinkingcriticallyaboutethics'boxbasedon M.Saltsman, 'Theemployee of themonthhasa battery',The Wall Street Journal, 30January 2014, p.A13;L Weber, 'Robotsneedsupervisors too', The Wall Street Journal, 8 August2013,p. BS;S.Grobart, 'Robotworkers:Coexistence is possible' , Bloomberg BusinessWeekOnline, 13December2012; and D.Bennett, 'I'll havemyrobotstalkto yourrobots',Bloomberg BusinessWeek,21-27 February 2011, pp.52--62. 20. AustralianBureauof Statistics,Labour Force, Australia , October 2016, Cat.No.6202.0;and Year Book Australia, 2012, Cat.No. 1301.0(Canberra: Commonwealth of Australia). 21. Ernst& Young,'Thenewglobalmindset:Drivinginnovationthrough diversity',EYGM Limited,2010,p. 1. 22. See,for example,W.Bourke,'Populationdebatetakesa greentwist', The Age, 17 March2010,p. 3. 23. G.W.Loveman andJ.J.Gabarro,'Themanagerial implications of changingworkforcedemographics: A scopingstudy',Human Resource Management , Spring1991, pp.7-29. 24. See,for example,in Australia:DiversityCouncilAustralia,<www.dca. org.au>;andin NewZealand:TheEEOTrust,<www.eeotrust.org.nz>, 5 November 2013. Chapter 2 Management history 25. 'Post-crisisethics:Shiftingmindsetsor businessas usual', Knowledge@Australian Schoolof Business,1 June2010. 26. A. Main,'Seriousabandonment of duty,saysjudge', The Weekend Australian Financial Review, 16-17 April 2005, p. 12; andB. Frith, 'Corporatecrimshaveto account', The Weekend Australian , 16-17 April 2005,p. 36. 27. M.Hancock, managingeditor,GlobalEntrepreneurship Monitor2004 Executive Report,<www.gemconsortium .org>, 22 December 2005;and 'Thethird millennium:Smallbusinessandentrepreneurship in the 21st century', Officeof Advocacy, USSmallBusinessAdministration, US SmallBusiness Administration website,<www.sba.gov>, 15 February 2002. 28. J.Gordon,'Makingknowledgemanagement work', Training , August 2005, pp. 16-21; K.G.Smith,C.J.Collinsand K.D.Clark,'Existing knowledge, knowledgecreationcapability and the rate of new productintroduction in high-technologyfirms', Academy of Management Journal, April 2005, pp. 346-57; L. Argote, 'Reflectionson two viewsof managing learningand knowledgein organizations', Journal of Management Inquiry, March2005, pp. 43-8; J.S.Brownand P.Duguid,'Balancingact: Howto capture knowledgewithout killing it' , Harvard Business Review, May-June2000, pp. 73-80; E.C.Wengerand W.M.Snyder, 'Communit ies of practice:The organizationalfrontier', Harvard Business Review, January - February2000, pp. 139-45; and M.T.Hansen,N. Nohriaand T.Tierney,'What'syour strategyfor managingknowledge? ', Harvard Business Review, March - April 1999, pp. 106-16. 29. B.Willard,The Sustainability Advantage : Seven Business Case Benefits of a Triple Bottom Line (GabriolaIsland,BC:NewSociety Publishers , 2002). 30. 'Managingfor sustainability ' boxbasedon 'WorldPopulationClock', <www.worldometers.info/world-population> (theworldpopulation numberon this pageis constantlyupdated), 26 November 2016; UnitedNations,'Worldpopulationprojectedto reach9.7 billionby 2050', <www .un.org> , 29 July2015;B.Birrell,'Populationgrowthand sustainability ', AustralianParliamentary Library,8 December 2010; W.Bourke,'Weneednewpolicies,not spin,on population ', The Sydney Morning Herald Online, 25 June201O;andR.Engelman , 'Populationandsustainability:Canweavoidlimitingthe numberof people?',Scientific American Online, 1 June2009. 31. A. Steffen(ed.), World Changing : A User's Guide for the 21st Century (NewYork:Abrams,2008), pp.386-7. 32. CaseApplication basedonC.LeGrand,'Fordprepares to turn off thelights at Broadmeadows ', The Australian Online, 1 October 2016;P.King,'The Fordfailurehasmanyfathers', The Australian Online, 1 October 2016; R.Wallace andJ.Ferguson, 'Toyotato stopmakingcarsin Australia, follows FordandHolden' , The Australian Online, 10February2014; B.Carmichael, 'Thedeathof theAustralian carindustryis inevitable' , The Australian Financial Review, 31 October 2013,p.63; S.Maherand E.Hannan, 'Fordexitthe pitsfor industry',The Australian, 24 May2013, pp.1, 4; M.Owen,'Endof the roadloomsafterFord', The Australian, 24 May2013,p.9; M.Maiden,'RIPFord,thefirst dominoto fall', The Age, 24 May2013,p. B30;and'OneFord:GlobalcarFocusto rollout today',The New York Times Online, 11January 2010. 65