Presentation Chapter 2.ppt - Notes for Students · most important administrative theories are...

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CHAPTER 2

THE EVOLUTION OF MANAGEMENT THOUGHT

LEARNING OBJECTIVES

• To describe the evolution of management theory.• To explain the principle of job specialization and division of• To explain the principle of job specialization and division of

labor.• To identify the principles of administration & organization.• To explain the contributions of management science.• To explain how the external environment affects an

organization.

MGT-101 Yiannos Rossides2

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1. Importance of Management Theory

• Continuous need to find better methods to increase organizationalperformanceperformance.

• Economic, political and cultural forces have affected the development ofthese theories.

• The driving force behind the evolution of management theory is the searchfor better ways to utilize organizational resources in order to be morecompetitive.

• The accumulation of knowledge helps us proceed faster for better methodsand for more satisfied employees and customers.

• As we said in Chapter 1 the better use of org. resources increases org.efficiency and effectiveness which in turn directly influence


efficiency and effectiveness which in turn directly influenceorganizational performance. (Fig.2.1) Efficiency refers to the ability to make the best use of available resources to achieve goals. Effectiveness refers to the the ability to select the appropriate goals and achieve them.

The Evolution of Management Theory


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A. Scientific Management Theory

• The evolution of modern management began after the industrialrevolution in the closing decades of the 19th century.Introduction of steam power and development of sophisticated• Introduction of steam power and development of sophisticatedmachinery and equipment > weaving and clothing industries.

• Also, major economic, technical, and cultural changes were taking placeat this time.

- Adam Smith, the father of capitalism, after a lot of research came to theconclusion that increasing the level of job specialization increasesefficiency and leads to higher organizational performance.

• Job specialization refers to the process which is characterized by adivision of labor as workers specialize in different tasks over time. In


pother words, job specialization means that if a worker will specialize inonly task from all the tasks that are needed to complete a job, thenthis will increase org. performance because each worker will becomemuch more skilled at the specific task and therefore workers as agroup under this method will produce a product faster. (Example: Chairassembly)


• Frederick W. Taylor (1856-1915) Father of Scientific Management Father of Scientific Management• Taylor was best known for defining the techniques of scientific management.• Taylor observed that employees were working at less than full capacity (sultry=

meaning that workers don’t perform as they should) because (a) at the time not theright wage systems were in place (b) managers did not study work scientifically and(c) employees were afraid of loosing their jobs due to productivity increase.

Therefore, he believed that if the amount of time and effort that each workerexpends to produce a unit of output can be reduced by increasing specialization andthe division of labor, the production process will become more efficient. In otherwords, the most efficient division of labor could best be determined by scientificmanagement techniques rather than intuitive or informal rule-of-thumb knowledge.


g q g His studies are known as Time and Motion studies. Through his studies he

developed four major scientific principles:1. Scientific study of the task at hand.2. Proper selection and training of the workers.3. Cooperation between workers and supervisors.4. Proper division of work and responsibilities between management and workers.

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Scientific Management refers to the systematicstudy of relationships between people and tasks instudy of relationships between people and tasks inorder to redesign the work process to increaseefficiency. It focuses on scientific methods toachieve efficiency.

Di i i Select


+Mgt Science

Division of Work

SelectTrain

Evaluate Scientifically

B. Administrative Management Theory

• As we said in Chapter 1 Org. Structure is the system of task and authority relationshipsthat control how employees use resources to achieve the organization’s goals. Two of themost important administrative theories are Bureaucratic mgt and Fayol’s principlesof mgt:g

• Administrative management refers to the study of how to create an organizationalstructure that targets high levels of efficiency and effectiveness.

• The Theory of Bureaucracy, developed by Max Weber (1864-1920), is a formal systemof organization and administration designed to ensure efficiency and effectiveness.Bureaucratic Mgt emphasizes the need for organizations to operate in a rationalmanner. The focus was on the right structure that clearly defines responsibilitiesand authority and states in written form rules and regulations. Webber (German sociologist) tried to suggest the ideal organization but when his ideas are carried to

extremes they result in a lethargic organization with excessive paperwork (red tape).• Authority is the power to hold people accountable for their actions and to make

decisions concerning the use of organizational resources


decisions concerning the use of organizational resources.• Rules are formal written instructions that specify actions to be taken under various

different circumstances to achieve specific goals.• Standard Operating Procedures (SOPs) are specific sets of written instructions about

how to perform a certain aspect of a job.• Norms are unwritten, informal codes of conduct that prescribe how people should act in

particular situations and are considered important by most members of a group ororganization.

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• A bureaucratic system of administration is based on the principles shownon the following chart (Fig. 2.2)

• Principle 1: Formulation of line of authority into a hierarchicalPrinciple 1: Formulation of line of authority into a hierarchicalstructure. A manager’s formal authority derives from the position he orshe holds in the organization.

• Principle 2: Authority can be exercised effectively in an organization whenpositions are arranged hierarchically so employees know whom toreport to and who reports to them.

• Principle 3: Formulation of the process of career advancement to bebased on merit. People should occupy positions because of theirperformance, not because of their social standing or personal contacts.

• Principle 4: Formulation of rules and processes. The extend of each


p pposition’s formal authority and task responsibilities and itsrelationship to other positions in the organization should be clearlyspecified.

• Principle 5: Impersonality in the operation of rules and processes.Managers must create a well-defined system of rules, SOPs, and norms sothat they can effectively control behavior within an organization.

Weber’s Principles of Bureaucracy

Weber’s Principles of Bureaucracy

MGT-101 Yiannos Rossides10Figure 2.2

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• H. Fayol (1841-1925) is known as the father ofclassical management or father of managementth htthought.

- Although these principles were developed at the turnof the 20th century they still remain the foundationon which much of recent management theory andresearch are based. He developed the functionalapproach to management that is, the functions wetalked about last time were firstly identified asPl i O i i C di


Planning, Organizing, Commanding,Coordinating, & Controlling.

• Henri Fayol identified 14 principles that he consideredessential to increase the efficiency of the managementprocess. These are:

Fayol’s Principles of Management

• Division of Labor: allows for job specialization. jobs can have too much specialization leading to poor quality andj p g p q y

worker dissatisfaction.• Authority and Responsibility both formal and informal authority resulting from special expertise.

• Unity of CommandEmployees should have only one boss.

• Line of AuthorityA clear chain of command from top to bottom of the firm


A clear chain of command from top to bottom of the firm.• CentralizationThe degree to which authority rests at the top of the organization.

• Unity of DirectionA single plan of action to guide the organization.

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Fayol’s Principles of Management

• Equity The provision of justice and the fair and impartial treatment of all employees.

• Order• Order The arrangement of employees where they will be of the most value to the organization and

to provide career opportunities.• Initiative

The fostering of creativity and innovation by encouraging employees to act on their own.• Discipline

Obedient, applied, respectful employees are necessary for the organization to function.• Remuneration of Personnel

An equitable uniform payment system that motivates contributes to organizational success.S bili f T f P l


• Stability of Tenure of Personnel Long-term employment is important for the development of skills that improve the

organization’s performance.• Subordination of Individual Interest to the Common Interest

The interest of the organization takes precedence over that of the individual employee.• Esprit de corps

Comradeship, shared enthusiasm foster devotion to the common cause (organization).

C. Behavioral Management Theory

Behavioral Management refers to the study of how managers should behave tomotivate employees and therefore, encourage them to perform at high levels and becommitted to the achievement of organizational goals. Mary Parker Follett (1868-1933)“ th it h ld ith k l d h th it i th li d ”“authority should go with knowledge… whether it is up the line or down.”

• Mary Parker Follett believed that management overlooked the many ways employeescan contribute to the organization.

• Four major ideas:1. Group functioning is extremely important (team work)2. Create the principle of “power with” rather than the “power over” in management –

employee relations.3. Integration unity meaning that the organization should operate as one functional

whole with various interrelated parts working together effectively to achieveorganizational goals.

4 It should be better to share communication between the two parties involved


4. It should be better to share communication between the two parties involved.• In other words, she argued that employees should be involved in job analysis and

managers should allow them to participate in the work development process. Managersshould behave more as coaches and facilitators and not as supervisors. This showsthat she anticipated the current interest in self-managed teams andempowerment. Overall managers should pay attention to people and not onlyfocus on the best methods to do the work.

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The Hawthorne Studies (Hawthorne Works, Western Electric

Co., 1924-1932)

• Follett’s work was not appreciated at the time, so researcherspp ,focused more on finding ways to improve variouscharacteristics of the work setting such as job specialization.One such series of studies are the Hawthorne studies.

• 1st Set of studies: It began as an attempt to investigate howcharacteristics of the work setting – specifically the level oflighting or illumination- affect worker fatigue andperformance. The researchers conducted an experiment inwhich they systematically measured worker productivity at


c t ey syste at ca y easu ed o e p oduct ty atvarious levels of illumination. They found that regardless ofthe level of light, productivity increased. It fell onlywhen the level of light dropped at a point were workers couldno longer see. No relationship exists between change inlighting conditions and employee productivity.

The Hawthorne Studies

• 2nd Set of Studies: Subsequently, after a lot of research they found that workersproductivity was improved because of the attention the workers got fromthe researchers will performing the experiment and because by being thesubject of the study they were willing to cooperate to produce the results they

ffj y y g p p y

believed researchers desired. This particular effect is now known as theHawthorne effect. After this, many researchers turned their attention tomanagerial behavior and leadership. This means that if supervisors could betrained to behave in ways that would elicit cooperative behavior from theirsubordinates , then productivity could be increased. This led to the humanrelations movement.

• 3rd Set of Studies: Tried to find principles rearding norms (values, self regulation,beliefs). The experiments continued and in another set conducted by Elton Mayoand F. J. Roethlisberger it was discovered that workers as a group had adoptedon purpose an output restriction to protect their jobs. Thus, a work group’sinfluence over output can be as great as the supervisors’ influence. This


influence over output can be as great as the supervisors influence. Thisimplication coming out of the Hawthorne studies points out that managers mustunderstand the working of the informal organization. The Hawthorne studiesshowed the importance of understanding how the feelings, thoughts, andbehavior of work group members and managers affect performance. Thisled to an increasing interest to the area of management known as organizationalbehavior. Overall the Hawthorne Studies determined the human relationsview in management.

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The Hawthorne Studies (Hawthorne Works, Western Electric

Co., 1924-1932)

• The Hawthorne Effect suggests that a manager’sbehavior or leadership approach can affect workers’ level ofp ppperformance.

• The human relations movement supports thatsupervisors must be behaviorally trained to manageemployees in ways to extract their cooperation and increasetheir productivity.

• Informal organization refers to the system of behavioralrules and norms that arise in a group when management


rules and norms that arise in a group when managementtries to manage or change behavior in organizations.

• Organizational behavior studies the factors thatinfluence how individuals and groups respond to and act inorganizations.

Theory X and Theory Y (by Douglas McGregor)

“Managerial belief about human nature”

• After WW2 several studies examined how assumptions aboutworkers’ attitudes and behavior affect managers’ behavior. Themost influential approach was Theory X and Theory Y by D Mmost influential approach was Theory X and Theory Y by D.M.He stated that two sets of assumptions about how work attitudesand behaviors affect how managers behave in organizations.These two opposite sets of assumptions are known as Theory Xand Theory Y. (Fig 2.3)

- Theory X supports negative assumptions about workers thatlead to the conclusion that a manager’s job is to supervise themclosely and control their behavior.Theory Y supports positive assumptions about workers that lead


- Theory Y supports positive assumptions about workers that leadto the conclusion that a manager’s task is to create a worksetting that encourages commitment to organizational goals andprovides opportunities for workers to be imaginative and toexercise initiative and self-direction.

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Theory X vs. Theory Y

MGT-101 Yiannos Rossides19Figure 2.3

D. Management Science Theory

• Management Science Theory is a contemporary approach to managementthat uses quantitative techniques to help managers make maximum use oforganizational resources. Management science is a contemporary extensionf i tifi t d l d b T lof scientific management developed by Taylor.

IT plays an important role in management science since it is directly affectingthe tools managers use to make decisions.

• It has the following branches:• Quantitative management = uses mathematical techniques ex. How much

inventory to hold• Operations management = analyze organization’s production and delivery

systems to increase efficiency• Total quality management (TQM) = analyzes an organization’s input,

processing and output activities to increase product quality


processing, and output activities to increase product quality• Management information systems (MIS) = design information systems to

provide information (external and internal) which is vital for effectivedecision making. “The right information, at the right time, to theright people”

All of these provide tools than managers can use to help improve the qualityof their decision making and increase efficiency and effectiveness.

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E. Organizational Environment Theory

• Researchers went beyond examining how managers cani fl b h i ithi i ti t id hinfluence behavior within organizations to consider howmanagers control the organization’s relationship with itsexternal environment or as it is called the organizationalenvironment.

• Organizational environment refers to the set offorces and conditions that operate beyond anorganization’s boundaries but affect a manager’s ability


organization s boundaries but affect a manager s abilityto acquire and utilize resources.

• The Open-Systems Theory &• The Contingency Theory

The Open-Systems Theory

• Developed by Daniel Katz, Robert Kahn, and James Thompson in the 1960s.• In general, a system (Fig. 2.4,) is a set of interrelated parts working together

for a common goal.• Open system is a system which takes in resources from its external environmentp y y

and transforms them into products that are sent back to the external environmentfor purchase by customers.

• Closed system is a system that is self-contained and is not affected by changesin its external environment. Organizations that operate as closed systems, thatignore the external environment, and that fail to acquire inputs are likely toexperience entropy; Entropy refers to the tendency of a system to lose its ability to control itself and hence to

dissolve and disintegrate. An organization should operate as an open system characterizedby:

a. Negative Entropy; bring in new ideas to deal with problems


b. Differentiation; differentiate product from competition.c. Synergy; the performance gains that result when individuals and departments

cooperate & coordinate their actions. Also, managers should identify all the parts of a system (individuals, groups, units,

external elements) and see how thy affect each other and work together topromote efficiency and effectiveness. System theorists argue that thewhole is greater than the sum of its parts. If this is achieved it will lead tosynergy;

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Figure 2.4The Organization

as an Open System

Contingency Theory (1960s) (Tom Burns & G.M. Stalker in Britain, Paul Lawrence

& Jay Lorsch in U.S.A.)- There is no one best way to organize because not all situations managers

face are the same and because of changes in the environment such astechnological changes, entry of new competitors etc.R h d t b i i hi h i d- Researchers proposed two basic ways in which managers can organize andcontrol an organization’s activities to respond to characteristics of its externalenvironment:

• Contingency theory refers to the idea that the organizational structures andcontrol systems managers choose, depend on (are contingent on) characteristicsof the external environment in which the organization operates. Mechanistic structure is an organizational structure in which authority is

centralized, tasks and rules are clearly specified, and employees are closelysupervised. (based on Theory X) Mechanistic structure (I.e. McDonald’s) for astable environment , lower costs, control over conversion, and most efficient


stable environment , lower costs, control over conversion, and most efficientproduction

Organic structure is an organizational structure in which authority is decentralizedto middle and first-line managers and tasks and roles are left ambiguous toencourage employees to cooperate and respond quickly to the unexpected. (basedon Theory Y) Organic structure for changing environments, looser control,managers react quicker to changes but more expensive, more time, money andeffort spent on coordination.

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Fig.2-5: Contingency Theory of Organizational Design

Figure 2.5


Review Questions1. Define scientific management, administrative management and

the theory of bureaucracy. 2. Define behavioural management and state the major conclusion

of the Hawthorne Studies.

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