EARLY MANAGEMENT THEORIES RELEVANT TO THE MODERN WORLD ● HENRI FAYOL ● FREDERICK TAYLOR ● MAX WEBER ● LUDWIG VON BERTALANFFY ● ELTON MAYO ● DOUGLAS MCGREGOR Management theories are the set of general rules that guide the managers to manage an organization. Theories are an explanation to assist employees to effectively relate to the business goals and implement effective means to achieve the same. FREDERICK W. TAYLOR SCIENTIFIC MANAGEMENT THEORY • "One Best Way" from his time and motion studies • Taylor is the Father of Scientific Management Machine Model - viewed man as a means of production (economic man model) PRINCIPLES OF SCIENTIFIC MANAGEMENT Four Principles of Scientific Management are: ● Time and motion study - Study the way jobs are performed and find new ways to do them. ● Teach, train and develop the workman with improved methods of doing work. Codify the new methods into rules. ● Interest of employer & employees should be fully harmonized so as to secure mutually understanding relations between them. ● Establish fair levels of performance and pay a premium for higher performance. Basic Principles of the Machine Model • Division of labor and specialization • Unity of command and centralization of decisionmaking • One way authority Narrow span of control Concerned with optimizing effort at the shop or operator level and therefore utilizes micro approach HENRY FAYOL ADMINISTRATIVE MÄNAGEMENT THEORY ● Treated administration as a process as opposed to the prevailing practice wherein administration is under control of specialists. Management (FAYOL) ● Prevoyance (Forecast & Plan). Examining the future and drawing up a plan of action. The elements of strategy. ● To organize. Build up the structure, both material and human, of the undertaking. ● To command. Maintain the activity among the personnel. ● To coordinate Binding together, unifying and harmonizing all activity and effort. ● To control. Seeing that everything occurs in conformity with established rule and expressed command. MANAGEMENT FUNCTIONS ● Henri Fayol (1925), first identified the management functions of planning, organization, command, coordination, and control. ● Division of work According to this principle, the whole work must be divided into small task or units and instead of assigning the whole work to one person . One task or job should be assigned ● ● ● ● to one person according to the capability , qualification and experience of the person. When a person is performing a part of job again and again he will become perfect and specializes in that job and efficiency will improve. This principle is very useful for any ognisation be it private or public. It enhances overall performance of an organisation because specialists perform consistently . For example an orgaisation having different departments. Authority & Responsibility Authority refers to the right of superiors to get exactness from their subordinates. Responsibility means obligation for the performance of the job assigned. ● ● SUBORDINATION OF INDIVIDUAL INTERESTS TO GENERAL INTEREST ● When at work only the matters related to the job or duties should be focused, pursued and thought. ● The individual interest should be given less importance, while the general interest should be given most importance. ● ● ● ● ● ● ● ● ● ● ● ● ● Discipline Discipline refers to general rules, regulation for systematic working of an organisation. It doesn't mean only rules and regulation but it also means developing commitment in the employees towards organisation . It also means obedience to organisational rules that are necessary for functioning of an organisation. It includes Good supervision at all level Clear and fair agreement Application of penalties judiciously Employees must honor the commitment made by them and management must meet its promises. On one hand it enforces orderliness and motivates on other side. successful organization requires the common effort of workers. Penalties should be applied judiciously to encourage this common effort. UNITY OF COMMAND Each employee has one and only one Boss / Commander. In other words, a subordinate must report to only one superior. "Too many cooks spoil the soup." UNITY OF DIRECTION All activities which have the same objective must be directed by one manager, and he must use one plan. Direction also means leading. ● ● ● ● ● REMUNERATION Payments of salaries and incentive for workers in appreciation of their service. This policy should give maximum satisfaction to both employer and employees. CENTRALIZATION Decisions are made from the top. SCALAR CHAIN Scalar chain refers to the number of levels in the hierarchy from the ultimate authority to the lowest level in the organization. Having a formal chain of command from top to bottom. The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. Order People and material must be in suitable place at appropriate time for maximum ● ● ● efficiency. In other words, there must be orderliness in the organisation Material order - arrangement of things is called material order. It ensures proper & fixed place for various materials, tools, and equipments. Social order - arrangement of people is referred to as social order. It ensures proper & fixed place for each employee in an organisation. It results in increase in productivity and efficiency and smoothly functions without hindrance. ● ● ● ● ● ● ● EQUITY Equality of treatment without indiscrimination for the gender, creed or ethnicity. Equity creates loyalty and devotion in the employees. Equity refers to kind, fair and just treatment to employees. Employees will put their maximum efforts only when they are treated with kindness and justice. STABILITY OF TENURE ● Employee should not be temporary for long period of time. ● Employee should be made permanent so that they do not leave the organisation. ● Employees should not be moved frequently from one job position to another ● Once they are appointed their services should be served ● Time is required for an employee to get used to a new work -fayol ● Money spent on training the worker will go waste ● Stability of job creates team spirit & a sense of belongingness among workers ● ultimately increase the quality as well as quantity of work Initiative ● Workers should be encouraged to develop and carry out their plans for improvement Initiative means first step with self motivation. Fayol said that employees must ● ● be given an opportunity to take some initiative in making and executing a plan. so managers must welcome the suggestion and ideas of employees before framing plan. Employees must be given freedom to come ahead and use their skills to achieve expected goal. Positive effects are Develops feeling of belongingness in employees. Employees achieve target on time if they are set up with their consultation. ESPRIT DE CORPS Promoting team spirit will build harmony and unity within the organization. Loyalty, dedication and commitment. ACTIVITIES OF MANAGEMENT Luther Gulick (1937) expanded on Fayol's management functions in his introduction of the “Seven Activities of Management" planning, organizing, staffing, directing, coordinating, reporting, and budgeting. ACTIVITIES OF MANAGEMENT 1. Planning determines philosophy, goals, objectives, policies, procedures, and rules; carrying out long- and short-range projections; determining a fiscal course of action; and managing planned change. (Strategic- long term, 3 yrs or more; operational-short term, middle level management, dean, anchored in strategic plan) 2. Organizing establishes the structure to carry out plans, determining the most appropriate type of patient care delivery (anong aquity ng pt, ratio of nurse to pt), and grouping activities (organizational structure, flat, matrix) to meet unit goals. MANAGEMENT PROCESS 3. Staffing consist of recruiting, interviewing, hiring, and orienting staff. Scheduling, staff development, employee socialization, and team building. 4. Directing (commanding) consists of motivating, managing conflict, delegating( 5 R’s-person, circumstance, task) communicating, and facilitating collaboration. 5. Controlling functions include performance appraisals, fiscal accountability, quality control, legal and ethical control, and professional and collegial control. (Evaluation of services) ● ● ● ● PARTICIPATIVE MANAGEMENT Mary Parker Follett (1926) was one of the first theorists to suggest participative decision making or participative management. Managers should have authority with, rather than over, employees. Resolving conflicts The most essential work of leader is to create more leader. Follet practiced these principles of coordination that helped develop her theory of management: ● ● ● ● Direct contact (meetings) Early stages (everybody is important and has task) Reciprocal relationship Continuous process(maintenance, channel in everything that you do) Main principles of Follet’s management theory: ● Conflict resolution through integration(i.e identifying and meeting each party's underlying and often compatible need, as opposed to attempting to meet frequently incompatible expressed desire of each)often results in a win situation In ● Mary parker Follett leadership theory genuine power is not coercive (power over )but coactive (power with ). ● True leaders, according to Follett's theory ,"create Power power rather than expressing personal MAX WEBER Bureaucratic Theory of Management ● Weber made a distinction between authority and power. Weber believed that power educes obedience through force or the threat of force which induces individuals to adhere to regulations. ● According to Max Weber, there are three types of power in an organization ○ ○ ○ Traditional Power Charismatic Power Bureaucratic Power Or Legal Power. Features 1. Division of Labor 2. Formal Hierarchical Structure 3. Selection based on Technical Expertise 4. Management By Rules 5. Written Documents 6. Only Legal Power is Important 7. Formal and Impersonal relations Weber’s rules 1. Organizations are impersonal and are subject to authority 2. Organized in clearly defined hierarchy of offices 3. Each office has area of competence 4. Office is filled by way of a free contractual relationship and there is free selection for the positions 5. Technical qualification is basis of selection 6. Members are remunerated by fixed salaries; right to pensions; salary scale according to rank; right to resign 7. Office is sole primary occupation of the members 8. Office constitutes a career with a promotion system 9. Official work separated from ownership of the means of administration 10. Members subject to strict and systematic discipline and control in the conduct of the office. ELTON MAYO Behavioral Theory Of Management ● Elton Mayo's experiments showed an increase in worker productivity was produced by the psychological stimulus of being singled out, involved, and made to feel important. ● Hawthorne Effect, can be summarized as "Employees will respond positively to any novel change in work environment like better illumination, clean work stations, relocating workstations etc. Employees are more productive because they know they are being studied. -two types of employee ● ● Developed by Dr. William Ouchi Not necessarily an offshoot of McGregor's Theory X/Y, Ouchi's theory blends modern western management approaches with Japanese management techniques ● Such as arzen are based a amerina betteriques Points For Management ● Theory Z focuses on increasing employee loyalty to the company by providing a job for life with a strong focus on the well-being of the employee, both on and off the job ● This means stable employment, and high employee morale and satisfaction by creating opportunities for collaboration, lateral job movements, and mulit-level participation in decision-making THEORY X & THEORY Y Which theory is best? THEORY X ● Authoritarian approach to leadership. ● Managers believe that workers need to be monitored, controlled, and given financial incentives to work. ● Managers feel that workers are lazy and dislike work. ADVANTAGES ● Work is supervised (monitored) ● Decision making is likely to be faster. ● Workers stay on task. ● Motivation of workers Is uncomplicated THEORY Y • A leadership approach where the managers feel that workers are willing to take on responsibility. • Managers feel that workers show initiative. • Managers feel that workers want to work and that they are quite creative. ADVANTAGES • Worker satisfaction improves. • Workers can work on their own. • Workers are ambitious. • Creative workers solve problems. • Committed workers work better. EMPLOYEE PARTICIPATION Theory Z ● ● Chris Argyris (1964), managerial domination causes workers to become discouraged and passive. If self-esteem and independence needs are not met, employees will become discouraged and troublesome or may leave the organization. MANAGEMENT FUNCTIONS According to Henry Fayol, "To manage is to forecast and plan, to organize, to command, & to control" ● Luther Gullick has given a keyword 'POSDCORB ○ P stands for Planning ○ O for Organizing ○ S for Staffing ○ D for Directing ○ Co for Co-ordination, ○ R for reporting ○ B for Budgeting. But the most widely accepted are functions of management given by KOONTZ and O'DONNEL Planning, Organizing, Staffing, Directing and Controlling. ○ Systematic development of action programs Purposes ● It gives direction to the organization. ● It improves efficiency. ● It eliminates duplication of efforts. ● It concentrates resources on important services. ● It reduces guess work. ● It improves communication and coordination of activities ● ● ● Planning Basic function of management Deciding in advance (what, how and when to do, where we are& where we want to be) ○ Future course of action ○ Determining long and short term objectives Precision-soul of planning Feasibility-should be realistic in nature CHARACTERSITIC OF PLAN ● Must involve the future ● Must involve action ● Must have organizational identification ● ● ● Manager should collate all the information relevant to a given activity for which planning is to made. Should analyze past experience, current trends and future scope. Helps to bring the issues and problems related to activity to light. 2. Identification of opportunities: ● The exact planning starts. ● Identify the opportunity and carry out SWOT analysis. ● If the organization gets positive result, it would pass on to next stage, else the opportunity would be dropped. Planning process ● Planning is a process which contains number of steps within it. ● Planning process differs from organization to organization and from objective to objective. ● With some minor modifications, process is applied for all types plans. 3. Objective Setting ● ● ● Represents the destination of an organization. Objectives of an organization and various departments are fixed. Timeline to finish the objectives are also fixed during this stage 4. Planning premises: ● Denotes the circumstances under which the planning will be undertaken. ● It represents the assumptions that are to be considered. Strength/ weaknesses- inside Opportunities/ threats- outside PLANNING PROCESS: 1. Situation analysis: 5. Determining alternative course of actions ● Requires imagination, foresight and ingenuity. ● E.g. To improve productivity and organization can focus on increasing wages or incentives or technology investment, etc 6. Evaluation of alternatives: ● Analyzing various aspects and results of all the alternatives. ● Involves micro analysis of all the alternatives. 7. Selection of best alternatives: ● After micro analysis, the best methodology is preferred to accomplish the goal of an organization. 8. Derivative plans: ● Organizations have to think about secondary or sub plans to accomplish. ● E.g. If an organization prefers to provide transport facilities instead of outsourcing, then it has to think about financial burden, etc. 9. Implementation of plans: ● Communicating plan to all employees and providing instructions. ● Deploying facilities like raw materials, man power, machinery ● Linking implementation with reward system and ensuring execution. 10. Follow up: Monitoring the consequences of implementation, so that necessary corrective actions can be to fine tune the plan, ● ● STRATEGIC PLANNING Strategic planning examines an organization's purpose, mission, philosophy, and goals in the context of its external environment. Complex organizational plans that involve a long period (usually 3 to 10 years) are referred to as long-range or strategic plans. STRATEGIC PLANNING ● Planning responsibilities are different for managers at each organizational level. ● Strategic planning ● Top-level managers, formulate long-term strategic planning to reinforce the firm's mission (the mission clarifies organizational purpose ● Strategic plans are specified for a five years period or more; but circumstances dictate the planning horizon. THE TOOLS USED IN THIS PROCESS ARE: ● SWOT Analysis (Strength, Weakness, Opportunities, Threats) ● Portfolio Analysis ● PEST Analysis (Political, Economic, Social, Technological ● Environment) ● ● Porter's 5 forces Analysis (New Entrants, Rival Sellers, Substitute Products, Buyer Bargaining Power, Supplier Bargaining Power) BCG Matrix (Boston Consulting Group) SWOT ANALYSIS SWOT Analysis, also known as TOWS Analysis, was developed by Albert Humphrey at Stanford University in the 1960s and 1970s. SWOT definitions: ● Strengths are those internal attributes that help an organization to achieve its objectives. ● Weaknesses are those internal attributes that challenge an organization in achieving its objectives. ● Opportunities are external conditions that promote achievement of organizational objectives. ● Threats are external conditions that challenge or threaten the achievement of organizational objectives. ● OPERATIONAL PLANNING ● The process which predetermines the day to day activities of the business. ● The planning is done to support the strategic planning to accomplish the organizational goals. ● In this process, short run objectives of the company are determined as well as a means to achievé those objectives are also discovered. ● Middle-level management performs the function of the operational planning process. ● It includes planning of regular business activities and operations for a short period. THE FOLLOWING ARE THE FEATURES OF OPERATIONAL PLANNING: Objectives need to be clearly defined. ● Achievement of the desired result. ● The activities are to be performed as decided ● Maintenance of quality standards. ● Measuring performance. Features of operational planning Objectives need to be clearly defined. ● Achievement of the desired result. ● The activities are to be performed as decided ● Maintenance of quality standards. ● Measuring performance. MISSION ● The mission statement is a brief statement identifying the reason that an organization exists. ● Itidentifies the organization's constituency and addresses its position regarding ethics, principles, and standards of practice. VISION ● Vision statements are used to describe future goals or aims of an organization. ● It conjures up a picture for all group members of what they want to accomplish together. ● An organization will never be greater than the vision that guides it. PHILOSOPHY STATEMENT • The philosophy flows from the purpose or mission statement and delineates the set of values and beliefs that Buide all actions of the organization. • It is the basic foundation that directs all further planning toward that mission. • The organizational philosophy provides the basis for developing nursing philosophies at the unit level and for nursing service as a whole. GOALS AND OBJECTIVES • Goals and objectives are the ends toward which the organization is working. • Objectives are similar to goals in that they motivate people to a specific end and are explicit, measurable, observable or retrievable, and obtainable. GOALS: ● Goals are also called as objectives. ● Goals are desired outcomes or targets. ● They guide management decisions and form the criteria against which the work results are measured. What About Goals and Objectives? ● Goals are an expected or desired outcome of a planning process. Goals are usually broad, general expressions of the guiding principles and aspirations of a community. ● Objectives are precise targets that are necessary to achieve goals. Objectives are detailed statements of quantitatively or qualitatively measurable results the plan hopes to accomplish. POLICIES AND PROCEDURES Policies also can be implied or expressed: ● Implied policies, neither written nor expressed verbally, have usually developed over time and follow a precedent. ● For example, a hospital may have an implied policy that employees should be encouraged and supported in their activity in community, regional, and national healthcare organizations. ● Expressed policies are delineated verbally or in writing. ● Expressed policies may include a formal dress code, policy for sick leave or vacation time, and disciplinary procedures. RULES • Rules and regulations are plans that define specific action or nonaction. • Existing rules should be enforced to keep morale from breaking down and to allow organizational structure. FORECASTING • Forecasting involves trying to estimate how a condition will be in the future. • Takes advantage of input from others, gives sequence in activity, and protects an organization against undesirable changes. ● ● ● Workforce or personnel budget largest of the budget expenditures because health care is labor intensive. Operating budget reflects expenses that change in response to the volume of service, such as the cost of electricity, repairs and maintenance, and supplies. Capital budgets plan for the purchase of buildings or major equipment, which include equipment that has a long life (usually greater than 5 to 7 years). MANAGEMENT PROCESS: ORGANIZING ● ● ● ● ● ● ● BUDGETING Budgeting can help a business achieve financial success, predict profitability, provide a model for performance, formulate plans g strategies, and forecast income and expenditures. A budget provides insight into a company's financial posi for the near future. Leadership and management can use budgeting as a too control expenditures, evaluate plans and make better decisions when unexpected changes occur as budgeting provides a reference and framework for decision making. Budgeting provides metrics to measure as well as monitor actual business performance in comparison with expected business performance. BUDGET A budget is a financial plan that includes estimated expenses as well as income for a period of time. Accuracy dictates the worth of a budget; the more accurate the budget blueprint, the better the institution can plan the most efficient use of its resources. A budget is a quantitative plan for acquiring and using resources over a specified period. TYPES OF BUDGET ORGANIZING ● Organizing is the process of establishing formal authority. ● The arranging of component parts into functioning wholes. ● In the managerial, planning is the determination of what is to be accomplished, and organizing is the determination of how it will be accomplished. ● The purpose of organizing is to coordinate activities so that a goal can be achieved. The terms "planning" and "organizing" are often used synonymously Organization ● social unit of people, systematically structured and managed to meet a need or to pursue collective goals on a continuing basis. ORGANIZATIONAL PRINCIPLES • The principle of unity of Command • The principle of Requisite Authority • The Principle of Continuing Responsibility • The Principle of Organizational Centrality Why do we need an Organizational Structure ? ● All Organizations have a management structure that determines the relationships b/w functions and positions and subdivides and delegates roles, responsibilities and authority to carry out defined tasks. Organizational Structure ● It is a framework within which an Organization arranges it's lines of authorities and communications and allocates rights and duties. ORGANIZATIONAL STRUCTURE ● Formal structure, through departmentalization and work division, provides a framework for defining managerial authority, responsibility, and accountability. ● Roles and functions are defined and systematically arranged, different people have differing roles, and rank and hierarchy are evident. TYPES OF ORGANIZATIONAL STRUCTURE ● Line Organizational Structure ● Functional Organizational Structure ● Line and Staff Organizational Structure ● Matrix Organizational Structure ORGANIZATIONAL STRUCTURE • Informal structure is generally a naturally forming social network of employees. • It is the informal structure that fills in the gaps with connections and relationships that illustrate how employees network with one another to get work done. ADVANTAGES: LINE ORGANIZATION ● The line organization structure is very simple to understand and simple to operate. ● ● ● ● Communication is fast and easy and feedback can be acted upon faster Responsibility is fixed and unified at each level and authority and accountability are clear-cut, hence each individual knows to whom he is responsible and who is or in truth responsible to him. Since it is especially useful when the company is small in size, it provides for greater control and discipline in the organization. It makes rapid decisions and effective coordination possible. So it is economic and effective. ADVANTAGES: LINE ORGANIZATION ● The people in line type of organization get to know ea other better and tend to feel close to each other. ● The system is capable of adjusting itself to changing conditions for the simple reason that each executive sole responsibility in his own sphere. DISADVANTAGES: LINE ORGANIZATION ● There is a tendency for line authority to become dictatorial. ● It overloads the executive with pressing activities so that long-range planning and policy formulation are often neglected ● There is no provision for specialists and specialization, which is essential for growth and optimisation. ● Different departments may be much interested in their self-interests, rather than overall organizational interests and welfare. ● It is likely to encourage nepotism. ● It does not provide any means by which a good worker may be rewarded and a bad one punished. Advantages of this structure may include; ● Employees grouped by skill ● Greater sense of teamwork Disadvantages of this structure may • Lack of communication with other departments • Harmful competition • Management issues Advantages of this structure may include: • Focus on a single good or service • More centralized leadership Disadvantages of this structure may includ •Poor integration with other divisions •Competition between divisions • Lack of communication between divisions • Potential tax implications Advantages of this structure may include: • Fosters open dialogue • Flexible workplace environment Disadvantages of this structure may include • Leadership confusion •Conflicting leadership loyalties •Potentially more costly • Roles may not be clearly defined • Potentially heavy employee workload Advantages of this structure may Include: • Cost-efficient • Fosters good communication • Higher employee morale • Faster decision making Disadvantages of this structure may include: • Potential employee conflict • Leadership confusion TYPES OF ORGANIZATIONAL STRUCTURE 1. Tall or Centralized Organizational Structure 2. Flat or Decentralized Organizational Structure Flat vs. Tall Structures Flat structure: Small number of levels and broad span of management at each level - Manager must be able to delegate well - Advantages: • Great Job Satisfaction • More Delegation • Increased communication between levels of management • Tall Structure: Has many levels with small spans of management - Power is centralized on the top levels and there is more employee control - Advantages: • Greater control • Better Performance KEY ELEMENTS OF ORGANIZATIONAL STRUCTURE Six key Elements 1. Work Specialization -Division of Labor -The Degree to which Tasks/ Activities in an organization are divided into Separate Jobs. -A Job is broken down in Steps and each Step is done by a different person 2. DEPARTMENTALIZATION ● SIt is the basis of grouping the Jobs ● Ways of Classifying and Grouping Work Activities a. FUNCTIONAL: ○ Groups Jobs by Functions Performed. ● It is the most popular way to GROUP ACTIVITIES ● Can be Used in ALL types of Organizations, Only the Functions Change to Reflect the Organization': Activities ● It puts together Efficiencies due to similar b. PRODUCT Departmentalization: ● Groups Jobs by the Type of Product or Product Line. ● The major Advantage is the Increase ACOUNTABILITY for product PERFORMANCE ● Each Major Product Area is Placed under the Authority of a Manager for Everything regarding that Product c. PROCESS ● Groups jobs on the basis of Product Flow ● Each Dept. is Specializes in ONE SPECIFIC PHASE of PRODUCTION ● It can also be Used for processing CUSTOMERS as well as products d. GEOGRAPHICAL ● Groups jobs on the basis of Territory or Geography e. CUSTOMER ● Groups jobs on the basis of Common Customers ● Microsoft- organized around Four Customer Markets;Consumers, Businesses, Large Corporations, Software Developers 3. CHAIN OF COMMAND ● Continuous line of Authority that extends from upper organizational level to lower levels and CLARIFIES Who Reports to Whom. ● Authority and Unity of Command ● These concept do not have Substantial Relevance today because of Advancements in Information Technology and Trend toward Empowering Employees 4. SPAN OF CONTROL ● Number of employees a manager can Efficiently and Effectively Manage ● The Wider or Larger the Span, The more Efficient the Organization 5.CENTRALIZATION 6.DECENTRALIZATION ● The degree to which Lower level employees provide input or actually make decision Centralization vs Decentralization Centralization • The degree to which decision making is concentrated at a single point in the organization • Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders Decentralization • The degree to which lower-level employees provide input or actually make decisions • Employee Empowerment • Increasing the decision-making discretion of employees