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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
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65