Chapter 4 Historical Foundations of Management

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Chapter 3 Historical Foundations of Management

Historical foundations of management

 Study questions  What can be learned from classical management thinking?  What ideas were introduced by the human resource approaches?

 What is unique about the systems view and contingency thinking?

 What are continuing management themes of the 21st century?

Major schools of management thought

I. Classical management approaches  Developing universal principles for use in various management situations.

II. Behavioral management (or human resource) approaches  Human needs, the work group and social factors in the workplace.

III. Quantitative management approaches  Use of mathematical techniques for management problem solving.

IV. Modern approaches  Systems and contingency views of organisations.

I. Classical approaches to management

Three major branches within classical approaches:

1. Scientific management (Taylor and Frank and Lillian Gilbreths) 2. Administrative principles (Fayol and Follet) 3. Bureaucratic organisation (Weber)

Fig 4.1 Major branches in the classical approach to management Classical approaches

Assumption:

People are rational Scientific management Frederick Taylor Frank and Lillian Gilbreth Administrative principles Henry Fayol Mary Parker Follett Bureaucratic organisation Max Weber

1. Scientific management

 Frederick Taylor (Principles of Scientific Management) 4 Principles (for maximum prosperity of both)  Develop for every job a ‘science’ that includes rules of motion, standardised work processes and proper working conditions for every job.

 Carefully select workers with the right abilities for the job.

 Carefully train workers to do the job and provide proper incentives to cooperate with job ‘science’.

 Support workers by carefully planning their work and removing obstacles.

1. Scientific management (conti.)

  Frank and Lillian Gilbreths  Motion study  Science of reducing a job or task to its basic physical motions  Eliminating waste motions improves performance Practical lessons of Scientific management - Make results-based compensation a performance incentive - Carefully design jobs with efficient work methods - Carefully select workers with the abilities to do these jobs - Train workers to perform jobs to the best of their abilities - Train supervisors to support workers so they can perform jobs to the best of their abilities

2. Administrative principles

 Henri Fayol (French, 1916) – Administration Industrielle et Generale (based on experiences of successful managers)  Suggested 5 Functions of management  Foresight — to complete plan of action for the future  Organisation — to provide and mobilise resources to implement the plan  Command — to select, lead and evaluate workers to get the best work towards the plan  Coordination — to fit diverse efforts together, ensure information is shared and problems solved  Control — to make sure things happen according to plan and to take necessary corrective action

Henri Fayol (conti.)

Administrative principles (14) to guide managerial action 1. Specialization /Division of work 2. Authority and responsibility 3. Discipline 4. Unity of command 5. Unity of direction 6. Subordination of Individual interest to organizational interest 7. Remuneration of staff 8. Centralization 9. The scalar chain / line of authority 10. Order 11. Equity 12. Stability of staff 13. Initiative 14. Esprit de corps (strength in unity)

2. Administrative principles (conti.)

 Mary Parker Follett (1933) – Dynamic Administration: The collected papers of Mary Parker Follett  Emphasized role of groups and human cooperation  Groups are mechanisms through which individuals could combine their talents for a greater good.

 Organisations as cooperating ‘communities’ of managers and workers  The manager’s job is to help people in the organisation to make them cooperate and achieve an integration of interests.

Mary Parker Follett (conti.)

 Forward-looking management insights  Employee ownership creates sense of collective responsibility (precursor of employee ownership (stock options), profit sharing and gain sharing).

 Business problems involve a wide variety of interrelated factors (precursor of systems thinking).

 Private profits should always be considered vis-à vis the public good (precursor of managerial ethics and social responsibility).

3. Bureaucratic organisation (Max Weber)

    19 th Century German sociologist What should be the bases for exercising authority in the organizations Three bases of Authority - Traditional authority - Charismatic authority - Legal-rational authority Theory of Bureaucracy  An ideal, intentionally rational and very efficient form of organisation.

 Based on principles of logic, order and legitimate authority.

Bureaucratic organisation (Max Weber)

 Characteristics of bureaucratic organisations:       Clear division of labor Clear hierarchy of authority Formal rules and procedures (written) Office files (records) Impersonality Careers based on merit  Possible disadvantages of bureaucracy:      Excessive paperwork or ‘red tape’ Slowness in handling problems Rigidity in the face of shifting needs Resistance to change Employee apathy

II. Behavioral approaches to management (or human resource)

  Since 1920s a new thinking started on human side of enterprise: It has opposed classical theory on the ground that the people in the organization are human beings and not cogs in the machine - Focused more on the social context at work rather than regarding worker as responsive only to financial incentives 1. Hawthorne Studies and human relations - Mayo 2. Maslow’s theory of human needs 3. McGregor’s Theory X and Theory Y 4. Argyris’s theory of adult personality.

Fig 4.2 Foundations in the behavioural or human resource approaches to management Hawthorne Studies Elton Mayo Theory X and Theory Y Douglas McGregor Human resource approaches Assumption: People are social and self-actualising Theory of human needs Abraham Maslow Personality and organisation Chris Argyris

1. Elton Mayo - Hawthorne Studies

 1. The experiments on illumination 2. The relay-assembly test room experiments 3. The interviewing program 4. The bank-wiring observation room experiments  Initial study examined how economic incentives and physical conditions affected worker output   No consistent relationship found Called ‘Great illumination’  This has led to carrying out further studies

1. Elton Mayo - Hawthorne Studies

Chief Findings of Hawthorne Experiments

1. The informal org. and informal peer groups play critical role in org. behavior and productivity 2. Relationships are more critical to effectiveness than structures 3. The conception of economic man is inadequate and shortsighted 4. An employee should be considered as a total person and recognize his importance and dignity 5. Employee job satisfaction involved a wide variety of needs, motivations and rewards. Satisfaction and work environment are important determinants of performance 6. Bottom-up communications are superior to top-down ones Hawthorne effect — people who are singled out for special attention perform as expected

2. Maslow: theory of human needs

 A need is a physiological or psychological deficiency a person feels compelled to satisfy.

 Classified human needs into 5 levels  Physiological  Safety  Social  Esteem  Self-actualisation  Deficit principle: A satisfied need is not a motivator of behaviour.

 Progression principle: A need becomes a motivator once the preceding lower-level need is satisfied.

Fig 4.3 Maslow’s hierarchy of human needs

Self Actualization

5. Self-actualization needs

Highest level; need for self-fulfillment to grow and use abilities to fullest and most creative extent

4. Esteem needs

Need for esteem in eyes of others; need for respect, prestige, recognition and self-esteem, personal sense of competence, mastery Esteem

3. Social needs

Need for love, affection, sense of belongingness in one’s relationships with other people Social needs Safety and security

2. Safety needs

Need for security, protection and stability in the events of day-to day life

1. Physiological needs

Most basic of all human needs: need for biological maintenance; food, water and physical wellbeing Physiological

3. McGregor’s Theory X and Theory Y

Classified Managers’ dominant assumptions about workers - 2 types  McGregor’s Theory X assumes that workers:      dislike work lack ambition are irresponsible resist change prefer to be led  McGregor’s Theory Y assumes that workers are:   willing to work capable of self-control    willing to accept responsibility imaginative and creative capable of self-direction

3. McGregor’s Theory X and Theory Y

 Managers create self-fulfilling prophecies.

 Theory X managers create situations where workers become dependent and reluctant to assume responsibility.

 Theory Y managers create situations where workers respond with initiative, high performance. And assume responsibility

IV. Systems Theory and Contingency Theories in Management

 Systems thinking  System  Collection of interrelated parts that function together to achieve a common purpose  Subsystem  A smaller component of a larger system  Open system  An organisation that interacts with its environments in the continual process of transforming resource inputs into outputs.

Fig 4.4 Organisations as complex networks of interacting subsystems Organisational Network of subsystems Purchasing and inventory systems Marketing, sales and distribution systems Inputs Suppliers Accounting and financial systems Operations and service management systems Information and technology systems Outputs Customers

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IV. Systems Theory and Contingency Theories in Management

Contingency thinking

 Tries to match managerial responses with problems and opportunities unique to different situations  No ‘one best way’ to manage  Appropriate way to manage depends on the situation

Fig 4.5 The organizational value chain

Organization as a transformation system Resources and materials flow in Materials received and organize for use People and technology create products Finished products distributed Customer s served Management of the value chain

V. What are continuing management themes of the 21st century?

 Quality and performance excellence  Managers and workers in progressive organizations are quality conscious.

 Total quality management (TQM)  Comprehensive approach to continuous quality improvement for a total organisation  Creates context for the value chain

V. What are continuing management themes of the 21st century?

1.

2.

Eight attributes of performance excellence: Bias towards action Closeness to the customer 3.

4.

5.

6.

7.

8.

Autonomy and entrepreneurship Productivity through people Hands-on and value-driven Stick to the knitting Simple form and lean staff Simultaneous loose-tight properties

V. What are continuing management themes of the 21st century?

 Global awareness  Pressure for quality and performance excellence is created by a highly competitive global economy.

 Has fostered increasing interest in new management concepts:  Process reengineering  Virtual organizations   Agile factories  Network firms Adoption of Theory Z management practices

V. What are continuing management themes of the 21st century?

 Contemporary businesses must learn to become learning organizations.

 Learning organization success depends on:  culture that emphasizes information, teamwork, empowerment, participation and leadership  special leadership qualities

V. What are continuing management themes of the 21st century?

 The 21st century manager must be:  a global strategist  a master of technology  an effective politician  an inspiring leader

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