Honors Business Management
Chapter 2 – Management Theory
Key Questions
Section 2.1: What’s the payoff in studying different management perspectives, both
yesterday’s and today’s?
Section 2.2: If the name of the game is to manage more efficiently, what can the
classical viewpoint teach me?
Section 2.3: To understand how people are motivated to achieve, what can I learn from
the behavioral viewpoint?
Section 2.4: If the manager’s job is to solve problems, how might the two quantitative
approaches help?
Section 2.5: How can the exceptional manager be helped by the systems viewpoint?
Section 2.6: In the end, is there one best way to manage all situations?
Section 2.7: Can the quality management viewpoint offer guidelines for true
managerial success?
Section 2.8: Organizations must learn or perish. How do I build a learning organization?
Knowledge has
to be improved,
challenged, and
increased
constantly, or it
vanishes.
Peter Drucker
Vocabulary
Peter Drucker
Evidence-based management
Jeffrey Pfeffer
Robert Sutton
Historical perspective
Contemporary perspective
Therblig
Classical viewpoint
Scientific management
Frederick W. Taylor
Frank and Lillian Gilbreth
Soldiering
Motion studies
Differential rate system
Administrative management
Henri Fayol
Max Weber
Bureaucracy
Behavioral viewpoint
Human relations movement
Hugo Munsterberg
Industrial psychology
Mary Parker Follett
Integration
Self-managed teams
Elton Mayo
Hawthorne effect
“social man”
Abraham Maslow
Hierarchy of needs
Douglas McGregor
William Ouchi
Theory X
Theory Y
Theory Z
Self-fulfilling prophecy
Behavioral science
Quantitative management
Management science
Operations research
Operations management
Systems viewpoint
System
Subsystem
 Manager’s Toolbox – p. 39
 Section 2.6: Contingency Viewpoint – pp. 56-57
 Section 2.8: The Learning Organization in an Era of Accelerated Change
AT THE LIBRARY
Independent Sections
Inputs
Outputs
Transformation process
Feedback
Open system
Closed system
Contingency viewpoint
Quality management viewpoint
Quality
Quality control
Quality assurance
W. Edwards Deming
Joseph M. Juran
Total Quality Management
Learning organization
Virtual organizations
Boundaryless organization
Knowledge worker
Human capital
Social capital
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Fayol’s 14 Points
Fayol’s general principles of management are as follows:
1. Division of work: Work specialization can result in efficiencies and is applicable to both managerial
and technical functions. Yet there are limitations to how much that work should be divided.
2. Authority: Authority is the right to give orders and the power to exact obedience. It derives from the
formal authority of the office and from the personal authority based on factors like intelligence and
experience. With authority comes responsibility.
3. Discipline: Discipline is absolutely necessary for the smooth running of an organization, but the state
of discipline depends essentially on the worthiness of its leaders.
4. Unity of command: An employee should receive orders from one superior only.
5. Unity of direction: Activities aimed at the same objective should be organized so that there is one
plan and one person in charge.
6. Subordination of individual interest to general interest: The interests of one employee or group
should not prevail over the interests and goals of the organization.
7. Remuneration: Compensation should be fair to both the employee and the employer.
8. Centralization: The proper amount of centralization or decentralization depends on the situation.
The objective is the optimum use of the capabilities of personnel.
9. Scalar chain: A scalar [hierarchical] chain of authority extends from the top to the bottom of an
organization and defines the communication path. However, horizontal communication is also
encouraged as long as the managers in the chain are kept informed.
10. Order: Materials should be kept in well-chosen places that facilitate activities. Similarly, due to good
organization and selection, the right person should be in the right place.
11. Equity: Employees should be treated with kindness and justice.
12. Stability of personnel tenure: Because time is required to become effective in new jobs, high
turnover should be prevented.
13. Initiative: Managers should encourage and develop subordinate initiative to the fullest.
14. Esprit de corps. Since union is strength, harmony and teamwork are essential.
Assignment: Compare and contrast Fayol’s management principles with Weber’s management principles. Your
answer should be approximately 2-4 paragraphs in length.
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Best Companies to Work For
The human relations movement came to be considered too simplistic for practical use. However, some companies are
able to come up with creative ways to keep employees satisfied. Each year the Great Place to Work Institute ranks
America’s top employers in the annual “Best Companies To Work For.” Go to the institute’s web site
(www.greatplacetowork.com.) and find their list of best Fortune 500 companies.
Please type your responses to the following questions. Be sure to put your name on the top of the paper.
1.
List the top five companies.
2.
Choose one company from the list and use an Internet search engine to research the company. Summarize the
company’s background and mission.
3.
Follow the links to the Institute’s listing for the previous year. Where did the top five companies you listed in
question 1 rank during the previous year? If the rankings were different, what do you think caused the
company’s rank to change?
4.
List ten examples of practical applications of the behaviorist theories at work in these companies. In other
words, what specifically do these companies do to try to motivate their employees by understanding human
behavior?
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Too Much of a Good Thing?
Highly productive workers are keeping manufacturing jobs in tiny
Pella, Iowa. But they're also foiling economic growth.
Matthew Swibel
IN ANOTHER LIFE Mark Zylstra
might have been a Swiss watchmaker.
For now the 31-year-old plant
manager is content to lord over a
factory
floor
of
Vermeer
Manufacturing Co. in Pella, Iowa,
pointing to a directional drill assembly
line that used to be cluttered with 20
days' worth of parts inventory. Zylstra
and a group of seven studied the
problem, then resolved to stack those
parts 50 feet away in the machine
shop area. Seems trivial, but the move
allowed the plant to cut 10 days'
worth of inventory--Zylstra is now
trying to halve that number and free
up $600,000 a year--and also helped
make room for eight new assemblyline workers (who spend less time
looking for scattered parts). "We do
this stuff for survival," says Mary
Andringa,
Vermeer's
co-chief
executive and the founder's daughter.
Factory owners have been doing such
things for survival ever since
Frederick W. Taylor invented timeand-motion studies more than a
century ago. Productivity at Vermeer,
a $500 million (sales) manufacturer of
industrial and farm machinery, has
risen an average 4% in each of the last
seven years, the result of thousands of
changes to production methods.
Among them: suggesting how many
blueprints an engineer should have on
his desk, deciding how far to travel to
perform an assembly-line task and
reducing the time it takes to hire and
orient a new employee from 23 to 7
days. "If you're not doing lean
manufacturing,"
says
Zylstra,
"someone's gonna put you out of
business." He picked up that line
working down the road at Pella Corp.,
the $1 billion (sales) company where
over eight years he saw window units
roll off the line every 108 seconds;
productivity has gained an estimated
2% each year.
Such
continual,
incremental
improvements have helped the two
largest private employers in Pella keep
manufacturing jobs from being
exported abroad. Across Iowa 17
factories shuttered last year, according
to Plant Closing News; the state has
28,000 fewer manufacturing positions
since 2000. Vermeer and Pella
between them offer a combined 5,500
nonunion jobs in a town where 7,500
working-age adults live. Within the
last 12 months the two companies
have brought 650 new manufacturing
jobs
to
their
home
base.
Unemployment in the Pella area
stands at 4.2%, a full point below the
national average. Workers in Iowa's
manufacturing and mining sectors-the two areas most influenced by
Pella residents' output--earn an
average $758 a week, the highest
wages of any nonfarming industry in
the state. Not exactly a millionaire's
refuge, but in how many other rural
spots can you play the quintessential
capitalist sport, golf, as you can at
Pella's own Bos Landen Golf Resort?
"I do realize I don't live in the real
world sometimes," allows David
Vollmar, executive director of the
Pella Area Chamber of Commerce.
A little too perfect, perhaps. While
driving up their efficiency, Pella Corp.
and Vermeer have effectively
slammed the door on other sizable
businesses that have tried to plant a
foot. "We've created two great
manufacturing companies," says
Vollmar. "But I can't find anyone else
to come here because they're worried
about the tightness of the labor
market." It makes for timidity at
home: Pella doesn't have many
entrepreneurial spinoffs from its two
largest employers. The city's job
growth over the last five years? Nil.
Blame the chilling effect for the
painstaking seven years it took
Vollmar to convince Brown's Shoes
to open a store in Pella. Given the
three-shift schedules at Pella Corp.
and Vermeer, would employees have
enough time to shop? Recent town
hearings on property rezoning for a
Wal-Mart expansion drew fierce
debate. "If my son doesn't want to
work in a plant, there's nothing else
for him to do. At least Wal-Mart will
mean more jobs." So argued a woman
resident and Wal-Mart employee in
favor of the expansion. (The rezoning
measure passed.) She got it right. As a
two-company town, Pella can't
inoculate itself against a downturn. It
lost 1,000 or so manufacturing jobs
between 2001 and 2002, causing the
decline of approximately $58 million
in earned income.
Founded in 1847 by Dutch
immigrants, Pella provided rich soil
for grain and corn. A childhood home
of Wyatt Earp, the city was a
forgettable Chicago-Rock IslandPacific rail depot, 45 miles southwest
of Des Moines. In 1925 lumber
entrepreneur Peter Kuyper made an
initial $5,000 down payment to buy
Rolscreen Co., maker of an early
insect screen for windows that rolled
out of sight. What eventually became
Pella Corp. sells mostly residential
windows and doors in North
America, Japan and China.
Pella had an army of window plant
workers after World War II, when
farmer Gary Vermeer turned a
modest invention--a modified farm
wagon with a mechanical hoist--into a
company in 1948. Armed with only a
high-school
diploma,
Vermeer
introduced the world's first large,
round haybaler in 1971. Like Case and
Deere before it, Vermeer branched
off from farm machines into
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construction machines. It does a
thriving business in directionaldrilling equipment used, among other
things, to lay fiberoptic cable.
Most of the city's dozen or so factory
ventilation stacks belong to either
Pella Corp. or Vermeer. So, in effect,
do a few ecclesiastical spires: Each
firm's charitable programs benefit
churches (the town's church-to-bar
ratio is 29:2). There are a restored
opera house, an indoor community
swimming pool and a $2.5 million
Dutch-built working windmill--all
paid for mostly by the charitable
foundations of Pella Corp. and
Vermeer or members of these firms'
founding families. Sloping gambrel
rooflines fill the downtown Pella
streetscape, where stores still stock
Dutch-spiced beef, Dutch lace and
Dutch pastries.
What you won't find in Pella is a
union rep, despite some earnest
rounds of knocking on doors by
union organizers. The average annual
wage growth in Pella puts it 426 out
of 573 small towns measured by the
Policom Corp., an economic
development firm. Vermeer offers
free doctor and nurse visits to
workers and their families. Both
companies foot the tuition bill for its
employees to get college and
postgraduate degrees. "Unions will
tell you they can offer you better pay
and benefits," says Bruce Severson,
production area manager at Vermeer.
"But I'm not convinced."
Strict union job classifications stifle
innovation, says William Schwartz, a
business consultant who has run
workshops at Pella Corp. on kaizen,
the Japanese art of continual
improvement. Indeed, some of the
best ideas have emerged from
weeklong
brainstorming
events
involving ten or so workers from
different job categories. Unfettered by
job assignments, participants can set
an
objective--say,
to
reduce
production errors or streamline order
entry--or come up with novel product
ideas. One such session gave rise to a
Pella innovation this year: between-
the-glass cordless blinds and shades
(window and patio-door treatments
tucked between panes of glass and
away from dust and yanks from kids).
Efficiency can carry you only so far.
In another company town 30 miles to
the
north
a
more
famous
manufacturer put itself through
similar cycles of self-improvement.
The results at Maytag-300 layoffs in
the past 18 months and warnings last
month that the flagship laundry
machine factory is in deep trouble-have sent town leaders on a desperate
scramble to secure a new economic
lifeline. Their answer: a $76 million
Nascar racetrack that will be partly
subsidized by the state.
Iowa legislators are also putting up
$100 million in order to attract 300
companies and bring 15,000 jobs to
the state. What worries Vollmar in
Pella is that he's not high on their list.
"I've struggled for 12 years to find the
next Pella Corp. or Vermeer," he says.
"And I haven't had anyone close to
discussion."
Forbes; 5/23/2005, Vol. 175 Issue 11, p146-148
Questions for Review
1. Briefly state the main idea of this article? List three important facts that the author uses to support the main
idea.
2. What is kaizen?
3. What are the benefits and drawbacks to unions?
4. Why is the town trying to attract new businesses?
5. What examples of management theories in action did you find in the article?
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Deming’s Recommendations for Management
In his book Out of the Crisis, Dr. W. Edwards Deming presented 14 steps toward an improved management.
1.
Create constancy of purpose for improvement of product and service with the aim to become competitive and to
stay in business, and to keep providing jobs.
2.
Adopt the new philosophy. Western management must awaken to the challenge, must learn their responsibilities,
and take on leadership for change.
3.
Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by
building quality into the product in the first place.
4.
End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a
single supplier for any one item, on a long-term relationship of loyalty and trust.
5.
Improve constantly and forever every process for planning, production and service. Improve quality and
productivity, and thus constantly decrease costs.
6.
Institute training on the job. This should be a part of everybody’s everyday activities.
7.
Adopt and institute leadership. The aim of supervision should be to help people and machines and gadgets to do
a better job. Supervision of management is in need of overhaul as well as supervision of production workers.
8.
Drive out fear so that everyone may work effectively for the company because they want it to succeed.
9.
Break down barriers between staff areas or departments. People in research, design, sales, and production must
work as a team, to foresee problems of production and in use that may be encountered with the product or
service.
10.
Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of
productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and
low productivity belong to the system and thus lie beyond the power of the work force.
11.
Eliminate numerical quotas for the workforce and numerical goals for management.
12.
a.
Eliminate work standards (quotas) on the factory floor. Substitute leadership.
b.
Eliminate the obsolete concept of “management by objective.” Eliminate management by numbers,
numerical goals. Substitute leadership.
Remove barriers that rob people of pride of workmanship—eliminate the annual rating or merit system.
a.
Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of
supervisors must be changed from sheer numbers to quality.
b.
Remove barriers that rob people in management and in engineering of their right to pride of workmanship.
13.
Institute a vigorous program of education and self-improvement for everyone. Let them participate to choose the
areas of development.
14.
Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.
(Source: Enrique Mora, “W. Edwards Deming, His 14 Recommendations Changed the History of Japan and the
World,” September 8, 2004, www.tpmonline.com Total Productive Maintenance Online.)
Assignment: Identify which of Deming’s 14 steps are also elements of other researchers’ findings. Also note which of
the 14 steps are unique to Deming. Your answer may be in paragraph or chart form.
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Movie – Gung Ho
1. Which management theory do you think the Japanese are using at the start of the film?
2. Why does Hunt Stevenson travel to Japan?
3. What effect did the closing of the factory have on the town?
4. How would you critique Hunt’s presentation to the Japanese executives?
5. What management role(s) does Hunt fulfill when he speaks at the union meeting?
6. Why does the company day start with exercise? What management theory does this reflect?
7. What management theory do the Japanese use when they review the work of the employees to achieve “zero
defects”?
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8. Why do the Japanese want the employees to learn each part of the job?
9. What solution does Hunt have to the problem of low production? What management theory or theories would agree
with this solution?
10. For what did Kazihiro have to apologize to his workers?
11. When Kazihiro confronts his boss, what challenge of management did he believe the Japanese model failed to
achieve?
12. Which management theory is in use when the workers try to make the last 1,000 cars?
13. What management theory is being used when Sakamoto rejects the car during the final count?
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Chapter 2 Review
Part A – Questions for Review
1. Discuss how management is an art and a science.
2. List the four reasons for studying theoretical perspectives.
3. List the three historical management approaches.
4. What was ultimately determined to be true about the Hawthorne Effect?
5. Give one real-life example of operations research.
6. List the three viewpoints of the contemporary perspective.
7. List the four parts of a system.
8. Give a real-life example of the contingency perspective.
9. What is the difference between quality control and quality management?
10. List the four components of Total Quality Management.
11. List the three parts of a learning organization.
12. List the three key functions of the learning organization.
13. List the consequences of accelerated change as they relate to organizations.
14. With the systems viewpoint in mind, list at least two examples for each of the following: (a) inputs; (b) outputs; (c)
transformational process; (d) feedback.
Part B – Vocabulary Review
Administrative management
Behavioral science
Behavioral viewpoint
Classical viewpoint
Closed system
Contemporary perspective
Contingency viewpoint
Feedback
Historical perspective
Efficient
Human relations movement
Inputs
Learning organization
Management science
Open system
Operations management
Outputs
Quality assurance
Quality control
Quality management viewpoint
Quantitative management
Scientific management
Subsystems
System
Systems viewpoint
Total quality management
Transformation process
1. _____________________ ________________________ is concerned with managing the total organization.
2. The _____________________ _______________________ emphasized the importance of understanding human
behavior and of motivating employees toward achievement.
3. The _____________________ _______________________ ________________________ proposed that better
human relations could increase worker productivity.
4. _____________________ _______________________ relies on scientific research for developing theories about
human behavior that can be used to provide practical tools for managers.
5. _____________________ _______________________ is the application to management of quantitative
technologies such as statistics and computer simulations and _____________________
_______________________ focuses of using mathematics to aid in problem solving.
6. _____________________ _______________________ focuses on managing the production and delivery of an
organization’s products or services more effectively.
7. A _____________________ is a set of interrelated parts that operate together to achieve a common purpose and
______________________ are parts making up the whole system.
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8. The _____________________ _______________________ regards the organization as a system of interrelated
parts.
9. _____________________ are the people, money, information and materials required to produce an organization’s
good or services and _____________________ are the products, services, profits, losses and employee satisfaction
and discontent that are produced by the organization.
10. _____________________ _______________________ are the organization’s capabilities in management and
technology that can be applied to converting inputs into outputs.
11. Information about the relationship of the environment to the outputs that affect inputs is _____________________.
12. A(n) _____________________ _______________________ continually interacts with its environment wheras a
_____________________ _______________________ has little interaction with its environment.
13. The _____________________ _______________________ emphasized that a manager’s approach should vary
according to the individual and the environmental situation.
14. _____________________ _______________________ ____________________________ includes quality
control, quality assurance and TQM.
15. _____________________ refers to the total ability of a product or service to meet customer needs.
Part C – Multiple Choice
1. The classical viewpoint is part of what perspective?
a. management
b. historical
c. quality
d. contingency
2. Who formulated the Hawthorne effect?
a. Fayol
b. Hawthorne
c. Munsterberg
d. Mayo
3. All of the following make up the four parts of a system except:
a. subsystems
c. outputs
b. inputs
d. feedback
4. All of the following are components of TQM except:
a. get every employee involved
b. listen and learn from customers
c. use quality control to identify and eliminate problems
d. make continuous improvement a priority
5. Which is not part of a learning organization?
a. transferring knowledge
b. modifying behavior
c. creating knowledge
d. controlling knowledge
6. Max Weber felt bureaucracies should have all of the following functions except:
a. formal rules and regulations
c. well-defined hierarchy of authority
b. impersonality
d. narrow spans of control
7. The classical viewpoint is too:
a. strict
b. bureaucratic
c. mechanistic
d. organic
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8. Who were proponents of scientific management?
a. Taylor and Maslow
b. Taylor and Gilbreth
c. Weber and McGregor
d. Follet and Mayo
9. The contingency perspective includes which of the following viewpoints?
a. quality management
c. behavioral
b. classical
d. quantitative
10. Taylor and Weber were proponents of which of viewpoint?
a. classical
b. analytical
c. administrative management
d. behavioral
11. Which term best describes Munsterberg, Follet and Mayo?
a. humanists
b. human relationists
c. behaviorists
d. managers
12. Douglas McGregor’s negative, pessimistic view of workers was which of these theories?
a. Theory X
c. Theory Z
b. Theory Y
d. Theory Sigma
13. Operations management focuses on what?
a. problem solving techniques
b. productivity
c. effective production and delivery of products
d. effective management of people and services
14. Quality refers to:
a. strategy of minimizing errors by managing each stage of production
b. urging employees to strive for zero defects
c. total ability of a product or service to meet customer needs
d. all of above
15.Which of the following is not part of the contemporary perspectives?
a. organizations management
c. contingency
b. systems
d. quality management
Part D – True and False
1. ______ The systems viewpoint regards the organization as a system of interrelated parts.
2. ______ A closed system continuously interacts with its environment.
3. ______ TQM has four approaches.
4. ______ The historical perspective includes 3 viewpoints: systems, contingency and quality-management.
5. ______ Taylor and Gilbreth pioneered the classical viewpoint
6. ______ Mary Weber focused on the positive aspects of bureaucracies.
7. ______ The Hawthorne studies have stood the test of time.
8. ______ Maslow was a human relationist.
9. ______ Feedback is part of a system.
10. ______ To create learning organizations, managers transfer knowledge to customers.
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