Business Studies in Action: HSC Course 3rd edition
Chapter summaries
Topic 1: Business management and change
Chapter 2 Understanding business organisations with reference to
management theories

The management philosophy adopted by a business will have an enormous impact
on all aspects of the business’s operations.

A classical perspective on management, pioneered by Max Weber and Henri
Fayol, emphasises how best to manage and organise work so as to improve
productivity.

A scientific approach to management, pioneered by Frederick Taylor, studies a
job in great detail to discover the best way to perform it.


Classical and scientific management theory:
-
Time and motion studies used to reduce inefficiencies
-
Hierarchical organisational structure (bureaucracy)
-
Clear lines of authority (chain of command)
-
Narrow span of control
-
Productivity improvements through division of labour
-
Production line methods
-
Discipline as a feature of leadership
-
Autocratic leadership style; rules and procedures.
Management functions:
-
planning: a predetermined course of action. Involves strategic, tactical
and operational planning.
Business Studies in Action: HSC Course 3rd ed. Chapman, Norris, Devenish and Merritt. Chapter summary. Page 1
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organising: the range of activities that translate the objectives into
reality.
-
controlling: compares what was intended to happen with what has
actually occurred.

Management hierarchy is the arrangement that provides increasing authority at
higher levels of the hierarchy.

Senior managers have greater accountability, responsibility and power
compared to those managers at lower levels of the pyramid.
Board of directors; CEO; CFO;CIO
Senior executives
Divisional manager; Store manager.
Middle management team
Team manager; Supervisor
Frontline management team
Traditional management hierarchy

Managers should bring a range of leadership styles to their positions that may
change according to the situation.

Continuum of leadership styles:
Authoritarian or autocratic
(total management control)
Participative or
Laissez-faire
democratic
(more employee involvement)
Business Studies in Action: HSC Course 3rd ed. Chapman, Norris, Devenish and Merritt. Chapter summary. Page 2
Key feature
Decision making
Control
Staff
participation
Communication

Autocratic or
Participative or
authoritarian
democratic manager
manager
Makes all decisions and Consults with
informs employees
employees, asks for
suggestions then
decides
Centralised - controls
Shares decisionall activities
making with
employees
Expects employees to
High level of
follow orders
employee
empowerment
Top-down
Two-way
Laissez-faire
manager
Team based decisionmaking. Highly
qualified employees
working in teams.
Little or no central
management role.
Very high level of
employee
empowerment.
Two-way
The behavioural approach to management, pioneered by Elton Mayo, stresses
that people (employees) should be the main focus of the way in which the
business is organised.


Behavioural management theory:
-
Humanistic approach; employees are the most important resource
-
Economic and social needs of employees should be satisfied
-
Employee participation in decision-making
-
Flatter organisational structure
-
Broader span of control
-
Teams increase output and job satisfaction
-
Managers need good interpersonal skills.
-
Democratic leadership style emerging.
Management functions
Business Studies in Action: HSC Course 3rd ed. Chapman, Norris, Devenish and Merritt. Chapter summary. Page 3
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leading: having a vision of where the business should be in the long and
short term.


-
motivating: energising and encouraging employees.
-
communicating: exchanging information between people.
The hierarchical management structure has been criticised as being too:
-
slow and unresponsive to rapid change
-
expensive to maintain
-
difficult to manage due to the different layers
-
stifling of creativity.
In response, businesses are adopting a flatter management structure.
Manager
Employees or work teams

Flatter organisational/management structures have evolved due to the elimination
of one or more management levels. Main characteristics include:
-
‘de-layering’ of traditional hierarchical structure
-
establishment of market-focused work teams
-
making each work team responsible for a wide range of production
functions.

Reducing the levels of management gives greater responsibility to individuals in
the organisation.

Closely associated with the emergence of flatter organisational structures is the
development of work teams.

Political management theory:
Business Studies in Action: HSC Course 3rd ed. Chapman, Norris, Devenish and Merritt. Chapter summary. Page 4
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Managers use power and influence to achieve business goals.
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Organisational politics (unwritten rules of work).
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Informal coalitions and networks of stakeholders.
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Cooperation and conflict between coalitions.
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Manager must negotiate and bargain between competing interests.
-
Match sources of power to situations.
Sources of power
1. Legitimate
2. Expert
3. Referent
4. Reward
5. Coercive

Description
Status or position
Skills and abilities
Individual’s charisma
Ability to compensate
Actions or words
Managers need to be aware of both the formal and informal coalitions within the
workplace.

A coalition is two or more people who combine their power to push or gain
support for their ideas.

Strengths and weaknesses of management theories:
Theory
Classicalscientific
Behavioural
Strengths
Weaknesses
-
based on ‘scientific’ principles
division of labour
high worker productivity
clear chain of command
rules and regulations
-
-
human needs recognised
high morale
employee empowerment
motivated team members
flatter structure improves
communication
-
-
-
employee boredom and
exploitation
autocratic leadership style
job satisfaction ignored
alienation between employees
and managers
difficult to predict human
behaviour
slow decision-making process
no clear chain of command
conflict between theories
Business Studies in Action: HSC Course 3rd ed. Chapman, Norris, Devenish and Merritt. Chapter summary. Page 5
Political
-

recognises ‘power plays’
acknowledges coalitions and
networks
explains power bases
highlights need for negotiating
and bargaining
explains stakeholders’ role
acknowledges individual selfinterest
-
misuse of power
shifting power bases
source of real power difficult to
analyse
internal conflict
not based on scientific
measurement
perceived manipulative
strategies
The systems management approach views organisations as an integrated process
in which all the individual parts contribute to the whole.

A system contains:
-
inputs – the resources used within the business
-
transformational processes – converts the inputs into a finished product
-
outputs – information about how well the organisation has performed in
relation to its stated goals.

feedback – the products and other outcomes.
Contingency management approach stresses the need for flexibility and
adaptation of management practices and ideas to suit a particular situation.

Management is a discipline that is continually evolving.
Business Studies in Action: HSC Course 3rd ed. Chapman, Norris, Devenish and Merritt. Chapter summary. Page 6