Management Part I. Basics of Management, Evolution of Management, Motivation Fall

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1 Management Part I Basics of Management, Evolution of Management, Motivation 2015 Fall

2 Contents 1 Basics of Management Outline Definitions Organisation Management Management Functions Subfunctions Managerial Tasks Management Levels Operational Level Technical Level Strategic Level Types of Managers Skills of Managers Roles of Managers Interpersonal Roles Informational Roles Decisional Roles Questions to consider References 13 2 Evolution of Management Outline The Evolution of Management Early Management Pioneers Classical Management Perspective Behavioural Management Perspective Quantitative Management Perspective Integrating the major perspectives Contemporary Management Issues and Challenges Summary Scientific Management Classical Organisation Theory (Administrative Management) Bureaucracy Human Relations Quantitative Management Systems Approach Contingency Approach Questions to consider References 24 3 Motivation Outline Definition of Motivation Motivational Theories Content Theories Maslow s Hierarchy ERG Theory Herzberg s Two-Factor Theory McClelland s Theory of Needs Process Theories Adam s Equity Theory Vroom s Expectancy Theory Reinforcement Theory Summary of the key points Questions to consider References 36 2

3 1 Basics of Management 1.1 Outline Definitions, o Organisation, o Management, Management functions, Subfunctions, Managerial tasks, Management levels, o Operational level, o Technical level, o Strategic level, Types of managers, Managerial skills, Roles of managers, o Interpersonal roles, o Informational roles, o Decisional roles. 1.2 Definitions Organisation The understanding of the practice of management begins with the recognition that managers act within a system. Organisations, as systems, coordinate activities through subsystems in order to transform inputs (such as raw materials) into outputs (such as products or services). Coordinating these activities within an organisation is central to the manager s task. The key terms (organisation and management) have been defined in different ways. The meanings of definitions are not the same in the management books. We will establish one definition for each so that we can consider each from a common reference point. It is well known, that organisation is a system that operates through human activity. People work together for a common goal (it is the goal or the strategy of the organisation), they strive for surviving, and operating profitably. Organisations are very complex social formations; they cannot be described with only one theory. There are particular theories, different viewpoints, and different characteristics about management and organisations, so briefly the main approaches are followings: According to the Classical Approach: the person is only a part of the whole system, the mechanization and automatization are much more important than the human resources. Behavioural Approach: the person is in the focus, the employee-satisfaction gets more importance. The next is Management Science Approach. The central theme of management science is to provide managers with quantitative bases for decisions regarding the operations under their control. MS and operational research are synonymous. Operations research, sometimes 3

4 known as management science, attempts to take a scientific approach to solving management problems, particularly in the areas of logistics and operations. There are attempts to integrate the three Approaches: these are the System Approach and Contingency Approach. The System Approach stresses that organisations must be viewed as total systems, with each part linked to every other part. The Contingency Approach stresses that the correctness of a managerial practice is contingent on how it fits the particular situation in which it is applied. This approach seeks to match different situations with different management methods. In the next chapter you can read about these approaches in details. There are 3 levels of organisations. In nutshell there is: Macro level, which means a kind of cooperation among different organisations. The next one is Mezzo level, which contains structures of the organisations, and other influencing factors. And last but not least Micro level, which means the behaviour of members of the organisations, motivation, conflict, so all the factors, that have an influence on organisation Management According to Griffin management is about planning, organising, controlling and leading the financial-, physical-, informational-, and human resources in an effective and efficient way. The main points are the resources of organisation, the functions and the way the leaders and managers do it. This definition answers the following questions: What do we do? What resources do we use? and Why/How do we do it? 1.3 Management Functions It is a complex process with four stages or periods. They are 4 management functions, so called Planning Organising Controlling Leading and there are human, technological, financial, and information resources in organisations. The aim of managers is to operate with these functions in order to achieve organisational goals. 4

5 The 4 functions can be interdependent: organising follows planning, controlling follows organising, but leading has influence on all the other three functions, and there are feedbacks (arrows) among them as well. This connection and order between the function is generally true, but in certain cases the order can change of course. According to Peter Drucker, expert of management sciences, management is the process undertaken by one or more individuals to coordinate activities of others to achieve results, which are not achievable by one individual acting alone. He believes that the work of management is to make people productive. Another view of management (according to Peters and Waterman In Search of Excellence) emphasizes mentorship, a love for managing and working with people: managers are excellent communicators and value shapers, and help to get the jobs done. 1.4 Subfunctions Let s see the meaning of the four functions and their subfunctions in details. The first one is Planning (in other words, goal setting and process to achieve them) planning is the process of setting objectives, and then determining the steps needed to reach them. We don t know exactly the future, but we have assumptions, and we create alternatives to plan the future events. Forecasting: we are always predicting the future, the upcoming features, the things that we cannot know in the proper way. So we try to figure it out with models or with help of computers. Example: guests in a hotel. Defining politics: we have to define ways to achieve strategic goals, we have to have some laid-down rules, so we define politics of operation and behaviour. Example: Academic and Examination Regulations at BUTE. Goal setting: to work out strategy, we have to accept some quantitative indicator, which we try to reach with the individual and organisational performance. Programme planning: to realize the goals we need some written programmes, which can help us to stay in a right way of performing. 5

6 Scheduling: we have to determine our performance in a timetable, so we have to report about results from time to time. Costing analysis: we need to plan the costs and revenues as well, we have to plan the costs of the certain processes and resources. Process planning: we have to identify our main, operating processes and our supplementaryor subprocesses as well. The second function is Organising (it contains tasks, resources, and structure): this is the process of assigning duties to personnel and coordinating employee efforts in order to ensure maximum efficiency. The manager must consider both structure and people! Job design: we have to develop jobs needed to perform our strategy. We can do it by specialization, job-rotating, job enrichment, but we have to develop the job description as well. Example: lecturer s job description. Resource allocation: the main point is aligning tasks and people and other resources, everybody needs to know what to do, and whose got the responsibility. Coordination: we need to have tools to make people work together, it can be a laid down rule, or teamwork and so on. Departmentalization, organisational structure: we need to decide the organisational structure based on our activities, knowledge and external factors, such as environment and thoughts of shareholders. The third step is Controlling (which means standard-setting, and taking measures): every organisation needs to control both operations and people. This function is needed because the future is unpredictable. Not only in the end of the production, but sooner do we have to control the processes during the operation. If we control the process continuously, our wastage/loss will be less. Setting standards: we need norms, to which we can compare to our results and to communicate to people. Monitoring: we have to oversee our processes and people continuously in order not to make big faults. Evaluation: we compare our performance to the planned and set standards. We need to know the relation to interfere in the processes. Feedback: depending on the results, we can make positive or negative efforts in the processes to correct them. Last but not least there is Leadership (influencing the behaviour of organisational members): this is the process of influencing people to direct their efforts toward the achievement of some particular goals. Managers must have the ability about human behaviour, the concept of leadership and of communication. Simply leading is showing the right way and driving people. Selection: we need a certain number of employees to perform our tasks, and when someone leaves, we need to replace him. We need to choose from applicants, for example with the help of tests or interviews. Developing, training: if somebody doesn t have enough knowledge, skills or other competencies, we have to suggest him trainings or some kind of further education, but he can learn new ideas and solutions from us as well. 6

7 Decision: there are a lot of situation needing us to decide between two opportunities or it is about something that can be worth realizing. The scarce of resources, the allocation requires a lot of decisions. Motivation: we need to get our employees to do something, or perform much more, so as a manager we have tools, such as praise, money, company car or cell-phone (so called fringe benefits), promotion, that we can use for driving people. Coaching: as a leader we have much more knowledge and experiences so we can show the right way to our employees (but it doesn t mean giving the solution for the problem) Communication: we need to talk to our employees individually / face to face and as a group as well. We have to organize smaller and larger meetings, where we can communicate positive results and problems as well. The leaders have to be able to grab the attention. 1.5 Managerial Tasks All modern managers, in any country in the world essentially face three managerial tasks. No matter what an organisation engages in, its managers face these tasks. Thus, managing is more than solving behavioural problems, it is more than solving technical problems, it is more than managing individual work, it is more than planning a department s future. The work of management is all of them. The figure above illustrates that while each of these three managerial tasks can be discussed separately, they are very much interrelated. 1.6 Management Levels Most organisations function on at least three different but overlapping levels, each requiring a different managerial focus and emphasis. They include operational level, technical level, and strategic levels. Managers at each of these three levels must plan, organize, lead, and control, in other words they must manage all of them. 7

8 1.6.1 Operational Level Operations function is at the core of every organisation. There the managerial task is developing the best allocation of resources that produces the desired output. In any organisation the operations level focuses on effectively performing whatever the organisation produces or provides services. A physical product, for instance, requires a flow of materials and supervision of operations. Colleagues must be sure that their subordinates are properly processed, scheduled, and taught Technical Level At this level, the managerial task is really twofold: (l) managing the operational function and (2) serving as a contact person between those who produce the product or provide the service and those who use the output. In other word managers at the technical level must make sure they have the correct materials and see that the output can be sold or used Strategic Level Every organisation operates in a broad social environment. As a part of that environment, an organisation is also responsible for it. The strategic level must make sure that the technical level operates within the boundary of society. Thus, the strategic level determines the long-term objectives and direction for the organisation. The organisation may also seek to influence its environment for example through lobbying efforts. 1.7 Types of Managers The understanding of the three management levels can be helpful in determining the primary focus of managers' activities at different levels in an organisation. For example, terms widely used in organisations include top management, middle management, and first-level or lower-level management. Top management corresponds to strategic level, middle management corresponds to technical level, and first-level management corresponds to operational level. While these terms may not always correspond exactly to the three levels, they provide an understanding of what managers do at each level. The term manager covers all three levels of course. Top management Middle management First or lower-level management Strategic level Technical level Operational level Top management Middle management First-level management Business organisation Educational institute Government organisation Chief executive officer President Cabinet secretary Superintendent manager Dean Commissioner Supervisor Department chairperson Program manager 8

9 1.8 Skills of Managers Certain general skills are needed for effective managerial performance, regardless of the level of the manager in the hierarchy. We can say the mix of skills differs depending on the level of the manager in the organisation. The figure indicates the basic skills needed by all managers human, technical, and conceptual. Technical skills Ability to use specific knowledge, techniques, and resources Conceptual skills Ability to see the overall organisation and integrate the parts of the system Human skills Ability to work with, communicate with, and understand other people Managers must accomplish much of their work through other people. For this, human skills (interpersonal skills) are essential. Human skills mean the ability to work with, communicate with subordinates, and understand others. These skills involve the ability to work with, motivate and direct individuals or groups in the organisation whether they are subordinates, peers or superiors. Technical skills involve the ability to use specific knowledge, techniques, and resources in work. Managers have to be good at technical issues in order to manage employees. These abilities are necessary to carry out a specific task. For example completing account statements. Conceptual skills (or system thinking) mean the ability to see the big picture, the complexities of the overall organisation and how the various parts fit together. Managers with conceptual skills understand all activities and interests of the organisation and how they interrelate. All three basic managerial skills are essential for effective performance, but the relative importance of the three skills to a specific manager depends on his or her level in the organisation. According to Griffin, there are other important skills: diagnostic skills, communication skills, decisionmaking skills, time management skills. Successful managers also possess diagnostic skills that enable a manager to visualize the most appropriate response to the situation. A physician diagnoses a patient s illness by analysing symptoms and determining their probable cause. Similarly, a manager can diagnose and analyse a problem in the organization by studying its symptoms and then developing a solution. Communication skills refer to the manager s abilities both to convey ideas and information to others and effectively receive ideas and information from others. These skills enable a manager to transmit ideas to subordinates so that they know what is expected, to coordinate work with peers and colleagues so that they work well together, and to keep higher-level managers informed about what is going on. In addition, communication skills help the manager listen to what others say and to understand the real meaning behind s, letters, reports, and other written communication. 9

10 Effective managers also have good decision-making skills. Decision-Making skills refer to the manager s ability to correctly recognize and define problems and opportunities and to then select an appropriate course of action to solve problems and capitalize on opportunities. No manager makes the right decision all the time. However, effective managers make good decisions most of the time. And, when they do make a bad decision, they usually recognize their mistake quickly and then make good decisions to recover with as little cost or damage to their organization as possible. Finally, effective managers usually have good time management skills. Time Management skills refer to the manager s ability to prioritize work, to work efficiently, and to delegate appropriately. As already noted, managers face many different pressures and challenges. It is too easy for a manager to get bogged down doing work that can easily be postponed or delegated to others. When this happens, unfortunately, more pressing and higher-priority work may get neglected. While successful managers must possess a high level of expertise in technical, human and conceptual skills, it is also true that each skill will vary in importance according to the level at which the manager is located in the organisation. Generally, technical skills become least important at the top level of the management hierarchy, replaced with a greater emphasis on conceptual skills. Technical skills are most pronounced at lower levels of management because the plans, policies and decisions developed at this level require the ability to understand how a change in one activity will affect change in other activities. The skills needed for effective performance at different levels of management are depicted in the following rectangle. Technical skills are required at each level of management, but they are most crucial to the effectiveness of first level managers. The technical level of manufacturing organisations, for example, includes various specialized departments such as production, personnel, engineering, legal, research and development, and marketing. Managers of each of these specialized departments must be able to speak with the authority about the technical details of the units they manage. Human skill is critical at the middle level of management, because middle managers deal with day-today interpersonal problems for example in manufacturing. They have interpersonal contacts with subordinates and other managers, and they have to handle a lot of conflicts, so they have to have these human skills at the largest proportion. On the other hand, the importance of conceptual skill increases as one gets higher in management. The higher one is in the hierarchy, the more involved one becomes in longer-term decisions that can 10

11 influence many parts of the organisation or the entire organisation. Thus, conceptual skill is most critical for top managers, so they should be good at conceptualizing. The functions play different roles at the managerial levels. Each function will vary in importance according to the level at which the manager is located in the organisation. Generally, leading becomes least important at the top level of the management hierarchy, replaced with a greater emphasis on planning. Controlling and organising are the most pronounced at the middle levels of management. The functions used for effective performance at different levels of management can be illustrated in a rectangle. 1.9 Roles of Managers Henry Mintzberg observed and studied the activities of top managers. He followed these managers and recorded each behaviour, meeting, and action they engaged in over an extended period of time. Mintzberg concluded that because their workdays are filled with interruptions, constant changes in plans, and specific demands, managers do not have time to be careful planners, organisational experts, careful leaders, or strict controllers. He categorized the managers' hectic days in ten specific, yet related roles. These ten roles can be separated into three different groupings: interpersonal roles, informational roles, and decisional roles. Regardless of the differences that may occur, however, all managers enact interpersonal, informational and decisional roles while performing their tasks. 11

12 1.9.1 Interpersonal Roles The figurehead, leader, and contact person roles focus on interpersonal relationships. They come into play when the manager must engage in interpersonal relationships. All managerial jobs require some duties that are symbolic or ceremonial in nature. For example a middle manager delivers a speech, a college dean hands out diplomas at graduation, the mayor of New York City gives the key to the city to an astronaut, on 01/09/10 ribbon-cutting ceremony for the new building at BUTE. These are examples of the figurehead role. The manager's leader role involves directing and coordinating the activities of subordinates. This may involve staffing (hiring, training, promoting) and motivating subordinates. The leadership role also involves controlling-making sure that things are going according to the plan. The contact person (or liaison) role gets managers involved in interpersonal relationships outside of their area of command. This may involve contacts both within and outside the organisation. Within the organisation, managers must interact with numerous other managers and individuals. They must maintain good relations with the managers who send work to the unit as well as those who receive work from the unit. Finally, managers often have interactions with important people outside the organisation. It is easy to see that this role often takes much of a manager's time Informational Roles This set of roles establishes the manager as the central focus for receiving and sending information. Through the three interpersonal roles discussed earlier, the manager builds a network of contacts. The interpersonal contacts aid the manager in gathering and receiving information in the monitor role and transmitting that information in the disseminator role and spokesperson role. The monitor role involves examining the environment to gather information about changes, opportunities, and problems that may affect the unit. The formal and informal contacts developed in the contact person role are often useful here. The information distributor (or disseminator) role involves providing important information to subordinates that they might not ordinarily know about or be able to obtain. In the spokesperson role, the manager represents the department to other people. This representation may be internal, as when a manager makes the case for salary increases for members of the department to top management. The representation also may be external, such as when an executive speaks for the organisation on a particular issue of public interest to a local civic organisation Decisional Roles Although developing interpersonal relationships and gathering information are important, these two activities are not ends in themselves. They serve as the basic inputs to the process of decisionmaking. In fact, some people believe that the decisional roles - entrepreneur, disturbance handler, resource allocator, and negotiator - are a manager's most important duties. The purpose of the entrepreneur role is to bring about changes for the better in the unit. The effective first-line supervisor looks continually for new ideas or new methods to improve the unit's performance. 12

13 In the disturbance handler role managers make decisions or take corrective action in response to pressure that is beyond their control. Because there are disturbances, the decisions usually must be made quickly, which means that that this role takes priority over other roles. The immediate goal is to bring about stability. The resource allocator role places a manager in the position of deciding who gets which resources, including money, people, time, and equipment. There are never enough resources to go around; the manager must allocate the scarce of resources toward numerous possible ends. Resource allocation, therefore, is one of the most critical of the manager's decisional roles. In the negotiator role, managers must bargain with other departments and individuals to obtain advantages for their own units. The negotiations may be over work, objectives, resources, or anything influencing the department. Effectively managing an organisation is a demanding task. Managers not only must develop skills related to the functional areas of management but also must learn how to integrate these activities. What makes this process demanding is that events and activities external and internal to an organisation can radically change the techniques and methods managers must use in order to arrive at successful outcomes. Managers cannot afford to be limited in their view of management, nor can they simply rely on how things were done in the past Questions to consider Define organisation and management! Define the four management functions! Define the types of managerial skills! Present the connection between managerial skills and managerial levels! Present the connection between management functions and managerial levels! Present the interpersonal / informational / decisional roles of manager! 1.11 References Aldag, R. J., Stearns, T. M. (1991): Management 2 nd edition p South-Western Publishing Co. Donnelly, J.H. - Gibson, J. L. Ivancevich, J. M. (1995): Fundamentals of Management 9 th edition p Irwin Inc. Griffin, R. W. (2011): Management: Principles and Practices, 10 th edition p South Western Cengage Learning Griffin, R. W. (1990): Management 3 rd edition p Houghton Mifflin Co. Kolb, D. A. Osland, J. S. Rubin, I. M. (1995): The Organisational Behavior Reader 6 th editon p Prentice Hall 13

14 2 Evolution of Management 2.1 Outline The Evolution of Management o Early Management Pioneers o The Classical Management Perspective o The Behavioural Management Perspective o The Quantitative Management Perspective o Integrating the major perspectives o Contemporary Management Challenges Summary o Scientific Management o Classical Organisation Theory (Administrative Management) o Bureaucracy o Human Relations o Quantitative Management o Systems Approach o Contingency Approach 2.2 The Evolution of Management This chapter provides an overview of the history and evolution of management thought so that you can better appreciate the importance of history in today s business world. We discuss the 3 major schools of management thought: classical, behavioural, and quantitative. Next we describe the systems and contingency approaches to management theory; these approaches help integrate the three schools of thought. Then we mention several contemporary management challenges. Finally you can find a short summary about the approaches. Time line of management theories McGraw-Hill Companies, Inc Even though large business firms have been around for only a couple of centuries, management has been practiced for thousands of years. The practice of management can be traced back several thousands of years. Let see some examples. The Egyptians applied the management functions of planning, organising and controlling when they constructed the great pyramids. The Roman Empire developed a well-defined organisational structure that greatly facilitated communication and control. Yet, business management was not considered a serious field of study for several centuries. 14

15 2.2.1 Early Management Pioneers The study of management from a scientific perspective did not begin to develop until the nineteenth century. Two of the earliest pioneers in management theory and research were Robert Owen and Charles Babbage. Robert Owen ( ), a British industrialist and reformer, was one of the first managers to recognize the importance of human resources and the welfare of workers. Until his era, factory workers were generally regarded and discussed in much the same terms as machinery and equipment. He incorporated such radical innovations as improved working conditions, a higher minimum working age for children, meals for employees, and reduced work hours. Although no one followed his lead at the time, his ideas were later developed in behavioural management theory. Charles Babbage ( ), an English mathematician, focused on creating efficiencies of production through the division of labour, and the application of mathematics to management problems. He placed great faith in division of labour and advocated the application of mathematics to such problems as the efficient use of facilities and materials. In sense, his work was a forerunner of both classical management theory and quantitative management theory Classical Management Perspective The classical management perspective is a label applied to the beliefs about management that emerged during the early years of the 20th century ideas that represent the first well-developed framework of management. The emergence of these ideas was natural outgrowth of both the pioneering earlier works noted above and the evolution of large-scale business and management practices. Classical management theory actually includes 2 different approaches to management: scientific management and classical organisation theory. Scientific Management o Concerned with improving the performance of individual workers (i.e., efficiency). o Grew out of the industrial revolution s labour shortage at the beginning of the twentieth century. Classical Organisation Theory (Administrative Management) o A theory that focuses on managing the total organisation rather than individuals. Scientific Management is concerned with the management of work and workers. It has a strong industrial flavour. It is advocated the application of scientific methods to analyse work and to determine how to complete production tasks efficiently. Famous contributors to scientific management were Frederick W. Taylor, Frank and Lillian Gilbreth, Henry Gantt, Harrington Emerson. Frederick Taylor ( ) played the dominant role in the emerging of this theory. He replaced old methods of how to do work with scientifically-based work methods. He also eliminated soldiering, where employees deliberately worked at a pace slower than their capabilities. He believed in selecting, training, teaching, and developing workers. As well as he used time studies of jobs, standards planning, exception rule of management, slide-rules, instruction cards, and piecework pay systems to control and motivate employees. Taylor s work has a significant impact on American industry. By applying his principles and similar approaches to job specialization, manufacturing organisations came to rely on heavily on mass-production techniques. 15

16 According to Taylor, there 4 principles or steps in scientific management, which have to be followed in order to achieve organisational goals and to be productive. 1. Develop a science for each element of the job to replace old rule-of-thumb methods. 2. Scientifically select employees and then train them to do the job as described in step Supervise employees to make sure they follow the prescribed methods for performing their jobs. 4. Continue to plan the work, but use workers to actually get the work done. Other important scientific management pioneers were the Gilbreth-couple and Henry Gantt. Frank and Lillian Gilbreth were a husband-wife team of industrial engineers. They were primarily interested in time-and-motion study and job simplification. Both developed techniques and strategies for eliminating inefficiency. Frank reduced the number of movements in bricklaying, resulting in increased output of 200%. At the same time Lillian made substantive contributions to the fields of industrial psychology and personnel management. Henry Gantt ( ) worked with Taylor at the Midvale Steel Company and was considered a Taylor disciple. Gantt felt the foreman should teach the workers to be industrious and cooperative which, in turn, would facilitate the acquisition of all other knowledge. Gantt also designed graphic aids for management called Gantt charts using horizontal bars to plan and control work. Similar to Taylor, Gantt called for the scientific study of tasks, movements, working conditions, and worker cooperation. He also focused on the connection between the involvement of management and financial interests. The example Gantt chart is showing key dependencies in a recruitment process. Gantt chart Whereas scientific management deals with the jobs of individual employees, Classical Organisation Theory (Administrative Management) focuses on managing the total organisation. It emphasizes the perspective of senior managers. Famous contributors to scientific management were Henri Fayol, Max Weber, Lyndall Urwick, and Chester Barnard. Two important contributors to the classical organisation theory (administrative theory) of management are Henri Fayol ( ) and Max Weber ( ). Both wrote during the scientific management era in America, but neither was accorded the full measure of his contribution until some decades after his death. 16

17 Henri Fayol ( ) was first to identify the specific management functions of planning, organising, leading, and controlling. Fayol was trained as a mining engineer and became the managing director of a coal-mining and iron foundry combine. From his own experience, he formulated and wrote papers about his ideas of administrative theory as early as His first mention of the elements of administration came in a book published in However, America was not thoroughly exposed to Fayol's theory until the book was translated in 1949 and entitled General and Industrial Management. Fayol identified the five major elements or functions of management as planning, organisation, command, coordination, and control. Planning and organisation received the majority of his attention in his writings. Fayol believed that management could be taught, that managerial ability was sorely needed as one moved up the ladder, and that management was a separate activity applicable to all types of undertakings. Besides, he established the fourteen principles of management. The 14 Management Principles from Henri Fayol are: 1. Division of Work: Specialization allows the individual to build up experience, and to continuously improve his skills. Thereby he can be more productive. 2. Authority: The right to issue commands, along with which must go the balanced responsibility for its function. 3. Discipline: Employees must obey, but this is two-sided: employees will only obey orders if management play their part by providing good leadership. 4. Unity of Command: Each worker should have only one boss with no other conflicting lines of command. 5. Unity of Direction: People engaged in the same kind of activities must have the same objectives in a single plan. This is essential to ensure unity and coordination in the enterprise. Unity of command does not exist without unity of direction but does not necessarily flows from it. 6. Subordination of individual interests (to the general interest): Management must see that the goals of the forms are always paramount. 7. Remuneration: Payment is an important motivator although by analysing a number of possibilities, Fayol points out that there is no such thing as a perfect system. 8. Centralization (or Decentralization): This is a matter of degree depending on the condition of the business and the quality of its personnel. 9. Scalar chain (Line of Authority): A hierarchy is necessary for unity of direction. But lateral communication is also fundamental, as long as superiors know that such communication is taking place. Scalar chain refers to the number of levels in the hierarchy from the ultimate authority to the lowest level in the organisation. It should not be over-stretched and consist of too-many levels. 10. Order: Both material order and social order are necessary. The former minimizes lost time and useless handling of materials. The latter is achieved through organisation and selection. 11. Equity: In running a business a combination of kindliness and justice is needed. Treating employees well is important to achieve equity. 12. Stability of Tenure of Personnel: Employees work better if job security and career progress are assured to them. An insecure tenure and a high rate of employee turnover will affect the organisation adversely. 17

18 13. Initiative: Allowing all personnel to show their initiative in some way is a source of strength for the organisation. Even though it may well involve a sacrifice of personal vanity on the part of many managers. 14. Espirit de Corps (Morale): Management must foster the morale of its employees. He further suggests that: real talent is needed to coordinate effort, encourage keenness, use each person s abilities, and reward each one s merit without arousing possible jealousies and disturbing harmonious relations. The work of Max Weber ( ) runs chronologically parallel to that of Fayol and Taylor. Weber was a German intellectual with interests in sociology, religion, economics, and political science. He was a professor, editor, government consultant, and author. Weber used the concept of bureaucracy as an ideal organisational arrangement for the administration of large-scale organisations. His work was not translated into English until His theory of bureaucracy is based on a rational set of guidelines for structuring organisations. Weber's concept of the best administrative system was actually similar to Taylor's. Some of Weber's essential elements included division of labour, and chain of command. He also believed that selection should be based on technical qualifications, officials'/managers' appointments should be based on qualifications, managers should not be owners, and impersonal and uniform rules should be applied. The most important contributions of Classical Management Perspective Laid the foundation for later developments. Identified important management processes, functions, and skills. Focused attention on management as a valid subject of scientific inquiry. The most important limitations of Classical Management Perspective More appropriate approach for use in traditional, stable, simple organisations. Prescribed universal procedures that are not appropriate in some settings. Employees are viewed as tools rather than as resources Behavioural Management Perspective The behavioural school of management thought began late in the scientific management era, but did not achieve large-scale recognition until the 1930s. The real catalyst for the emergence of the behavioural school was a series of research studies conducted at the Hawthorne plant of Western Electric between 1924 and This research became known as the Hawthorne Studies. This approach emphasizes individual attitudes and behaviours, and group processes, and recognizes the importance of behavioural processes in the workplace. Famous contributors to this approach were Elton Mayo, Hugo Munsterberg, and Mary Parker Follett. Hugo Munsterberg ( ) was a German psychologist, the father of industrial psychology, who advocated applying psychological concepts to employees selection and motivation industrial settings. Another early advocate of the behavioural school of thought was Mary Parker Follett ( ). She was interested in adult education and vocational guidance. She was one of the first persons who recognized the importance of the role of human behaviour in the workplace. Elton Mayo ( ) joined the Harvard faculty in 1926 as associate professor of industrial research, and two years later was asked to work with Western Electric, as part of the Harvard research group, to continue the Hawthorne Studies. 18

19 The Hawthorne Studies ( ) were conducted by Elton Mayo and associates at Western Electric. Mayo was intrigued by the initial results of the early illumination studies that showed output had increased upon changes in illumination either brighter or darker but no one knew why. Mayo believed the increased output came from a change in mental attitude in the group as the workers developed into a social unit. Other experiments included the piecework experiment, the interviewing program, and the bank wiring room experiments. From these experiments the Mayoists concluded that employees have social needs as well as physical needs, and managers need a mix of managerial skills that include human relations skills. The Human Relations Movement grew out of the Hawthorne studies - workers perform and react differently when researchers observe them. It proposed that workers respond primarily to the social context of work, including social conditioning, group norms, and interpersonal dynamics. Human relations movement assumed that the manager s concern for workers would lead to increased worker satisfaction and improved worker performance. It aimed to understand how psychological and social processes interact with the work situation to influence performance. This theory argued that managers should stress primarily employee welfare, motivation, and communication. Famous contributors to human relations movement were Abraham Maslow and Douglas McGregor. Abraham Maslow ( ) is advanced a theory that employees are motivated by a hierarchy of needs that they seek to satisfy. (See next chapter.) Douglas McGregor ( ) proposed Theory X and Theory Y concepts of managerial beliefs about people and work. According to McGregor, Theory X and Theory Y reflect two extreme philosophies that different managers take regarding their workers. Theory X is a relatively pessimistic and negative view of workers it is quite compatible with scientific management. Theory Y is more positive and represents the assumptions that human relations advocates make. In McGregor s view, Theory Y was a more appropriate philosophy for managers to adhere to. Theory X Assumptions o People do not like work and try to avoid it. o People do not like work, so managers have to control, direct, coerce, and threaten employees to get them to work toward organisational goals. o People prefer to be directed, to avoid responsibility, and to want security; they have little ambition. Theory Y Assumptions o People do not dislike work; work is a natural part of their lives. o People are internally motivated to reach objectives to which they are committed. o People are committed to goals to the degree that they receive rewards when they reach their objectives. o People seek both seek and accept responsibility under favourable conditions. o o People can be innovative in solving problems. People are bright, but under most organisational conditions their potentials are underutilized. 19

20 The most important contributions of Behavioural Management Perspective Provided important insights into motivation, group dynamics, and other interpersonal processes. Focused managerial attention on these critical processes. Challenged the view that employees are tools and furthered the belief that employees are valuable resources. The most important limitations of Behavioural Management Perspective Complexity of individuals makes behaviour difficult to predict. Many concepts are not put to use because managers are reluctant to adopt them. Contemporary research findings are not often communicated to practicing managers in an understandable form Quantitative Management Perspective The Quantitative Management Theory emerged during World War II to help the Allied forces manage logistical problems. It focuses on decision making, economic effectiveness, mathematical models, and the use of computers to solve quantitative problems. Teams of quantitative experts tackle complex issues facing large organisations, and help management to make a decision by developing formal mathematical models of the problem. In general there are 2 interrelated branches of the quantitative approach: management science and operations management. Management Science o Focuses on the development of representative mathematical models to assist with decisions. A mathematical model is a simplified representation of a system, process, or relationship. In its early years, management science focused specifically on models, equations, and similar representations of reality. In recent years, paralleling the advent of personal computer, management science techniques have become more sophisticated (for example: special computer simulations). Operations Management o Practical application of management science to efficiently manage the production and distribution of products and services. Operations management techniques are generally concerned with helping the organisation produce its products or services more effectively and can be applied to a wide range of problems. The most frequent techniques of operations management: linear programming, scheduling. queuing theory, network modelling, breakeven analysis, and simulation. 20

21 The most important contributions of Quantitative Management Perspective Developed sophisticated quantitative techniques to assist in decision making. Application of models has increased our awareness and understanding of complex processes and situations. Has been useful in the planning and controlling processes. The most important limitations of Quantitative Management Perspective Quantitative management cannot fully explain or predict the behaviour of people in organisations. Mathematical sophistication may come at the expense of other managerial skills. Quantitative models may require unrealistic or unfounded assumptions, limiting their general applicability Integrating the major perspectives The System Theory and Contingency Theory are relative newcomers to the field of management. These theories integrate the classical, behavioural, and quantitative management theories and can enlarge our understanding of all three. The Systems Approach o A system is an interrelated set of elements functioning as a whole. As shown in the figure, an organisational system consists of four basic elements: inputs, transformation process, outputs, and feedback. First, inputs enter the system from the environment. Material, financial, and information inputs are the most important for organisations. Next, through technological and material processes, the inputs undergo a transformation. Outputs are then produces in the form of a product or service, profit or losses, employee behaviours, and information. Finally, the environment reacts to these outputs and provides feedback to the system. The Contingency Approach o Appropriate managerial behaviour in a given situation depends on (or is contingent on) a wide variety of elements. The appropriate behaviour cannot always be generalised or extrapolated from other situations. The classical, behavioural, and quantitative perspectives originally tried to find the one best way to solve management problems. These approaches were universal in orientation. The contingency perspective holds that universal solutions and principles cannot be applied to social systems such as organisations. Hence, the manager must consider as many relevant elements (contingencies) as possible in every new situation. 21

22 2.3 Contemporary Management Issues and Challenges Acute labour shortages in high-technology job sectors and an oversupply of less skilled labour An increasingly diverse and globalized workforce The need to create challenging, motivating, and flexible work environments The effects of information technology on how people work The complex array of new ways of structuring organisations Increasing globalization of product and service markets The renewed importance of ethics and social responsibility The use of quality as the basis for competition The shift to a predominately service-based economy 2.4 Summary Consider the new distribution manager of a large wholesaling firm whose job is to manage on hundred truck drivers and to coordinate standard truck routes in the most efficient fashion. This new manager, with little relevant experience, might attempt to increase efficiency and productivity by employing strict time-and-motion analysis, work specialization, and close supervision (as suggested by scientific management). But doing so may cause decreased satisfaction and morale and increased turnover (as suggested by behavioural perspective). Similarly, the manager might develop a management science model to use route driver time more efficiently (from quantitative school). But this new system could disrupt existing work groups and social patterns (from behavioural perspective). The manager may create even more problems by trying to impose programs and practices derived from her or his pervious jobs. An incentive program welcomed by retail clerks, for example, might not work for truck drivers. The manager should soon realise that a broader perspective is needed. Systems and contingency orientations help provide this breadth. To solve a problem of declining productivity, the manager might look to the classical school (perhaps jobs are inefficiently designed or workers improperly trained), the behavioural school (worker motivation may be low or group norms may be restricting output), or the quantitative school (facilities may be improperly laid out or material stock outs may be resulting from poor inventory management). Of course, before implementing any plans for improvement, the manager should try to assess their effect on other areas of the organisation Scientific Management Key Concepts Used scientific methods to determine the one best way Emphasized study of tasks, selection and training of workers, and cooperation between workers and management Contributions Improved factory productivity and efficiency Introduced scientific analysis to the workplace Piecerate system equated worker rewards and performance Limitations Simplistic motivational assumptions Workers viewed as parts of a machine Potential for exploitation of labour Excluded senior management tasks 22

23 2.4.2 Classical Organisation Theory (Administrative Management) Key Concepts Fayol s five functions and 14 principles of management Executives formulate the organisation s purpose, secure employees, and maintain communications Managers must respond to changing developments Contributions Viewed management as a profession that can be trained and developed Emphasized the broad policy aspects of top-level managers Offered universal managerial prescriptions Limitations Universal prescriptions need qualifications for environmental, technological, and personnel factors Bureaucracy Key Concepts Structured network of relationships among specialized positions Rules and regulations standardize behaviour Jobs staffed by trained specialists who follow rules Hierarchy defines the relationship among jobs Contributions Promotes efficient performance of routine operations Eliminates subjective judgment by employees and management Emphasizes position rather than the person Limitations Limited organisational flexibility and slowed decision making Ignores the importance of people and interpersonal relationships Rules may become ends in themselves Human Relations Key Concepts Productivity and employee behaviour are influenced by the informal work group Cohesion, status, and group norms determine output Social needs have precedence over economic needs Contributions Psychological and social processes influence performance Maslow s hierarchy of need Limitations Ignored workers rational side and the formal organisation s contributions to productivity Research overturned the simplistic belief that happy workers are more productive Quantitative Management Key Concepts Application of quantitative analysis to management decisions Contributions Developed specific mathematical methods of problem analysis Helped managers select the best alternative among a set 23

24 Limitations Models neglect nonquantifiable factors Managers not trained in these techniques may not trust or understand the techniques outcomes Not suited for nonroutine or unpredictable management decisions Systems Approach Key Concepts Organisation is viewed as a managed system Management must interact with the environment Organisational goals must address effectiveness and efficiency Organisations contain a series of subsystems There are many avenues to the same outcome Synergies enable the whole to be more than the sum of the parts Contributions Recognized the importance of the relationship between the organisation and the environment Limitations Does not provide specific guidance on the functions of managers Contingency Approach Key Concepts Situational contingencies influence the strategies, structures, and processes that result in high performance There is more than one way to reach a goal Managers may adapt their organisations to the situation Contributions Identified major contingencies Argued against universal principles of management Limitations Not all important contingencies have been identified Theory may not be applicable to all managerial issues 2.5 Questions to consider Present the main issues, contributions and limitations of scientific management / classical organisation theory / bureaucracy / Human Relations / quantitative management / contingency approach! Explain Taylor s results in scientific management! Explain Fayol s 14 principles of management! Discuss the contribution and results of Hawthorne Studies! Present McGregor s XY Theory! Demonstrate the main challenges of contemporary management! 2.6 References Aldag, R. J., Stearns, T. M. (1991): Management 2nd edition p South-Western Publishing Co. 24

25 Donnelly, J.H. - Gibson, J. L. Ivancevich, J. M. (1995): Fundamentals of Management 9th edition p Irwin Inc. Griffin, R. W. (2011): Management: Principles and Practices, 10 th edition p South Western Cengage Learning Griffin, R. W. (1990): Management 3rd edition p Houghton Mifflin Co

26 3 Motivation 3.1 Outline Definition of Motivation Motivational Theories Content Theories o Maslow s Hierarchy o ERG Theory o Herzberg s Two-Factor Theory o McClelland s Theory of Needs Process Theories o Equity Theory o Expectancy Theory o Reinforcement Theory 3.2 Definition of Motivation In most instances employee performance is determined by 3 things: motivation (the desire to do the job), ability (the capability to do the job) and the work environment (the tools, materials and information needed to do the job). If an employee lacks ability, the manager knows what to do either provide training or replace the worker. If there is an environmental problem, the manager again knows what to do alter the environment to promote higher performance. If motivation is the problem, the task for the manager is more challenging, almost impossible. Individual behaviour is a complex feature, and the manager may be hard-pressed to figure out the precise nature of the problem and how to solve it. Motivation is the set of forces that causes people to behave in certain ways. In other words, we have a lot of needs, which encourage us to do something simply we call this motivation. The more motivated we are, the more intensive our action is. If you do something that meets your needs, you will be satisfied. Since motivation influences productivity, supervisors need to understand what motivates employees to reach peak performance. It is not an easy task to increase employee motivation because employees respond in different ways to their jobs and their organisation's practices. There are organisational and individualistic goals, sometimes it s almost impossible to synchronize. The motivation factors are hidden features, it is hard to get known them, and they can change during your life. 3.3 Motivational Theories There a lot of theories about motivation. All motivation theories search for the answer, what explains the human behaviour. 26

27 These theories can be divided into two main categories: Content theories - focus primarily on individual needs - the physiological or psychological deficiencies that we feel a compulsion to reduce or eliminate. Process theories - focus on the thought or cognitive processes that take place within the minds of people and that influence their behaviour Content Theories Content theories observe what kind of factors have an effect on motivation and what the components of motivated behaviour are Maslow s Hierarchy Abraham Maslow s hierarchy of needs is the most well-known theory of motivation. He hypothesized that within every human being there exists a hierarchy of five needs: 1. Physiological: Includes hunger, thirst, and other bodily needs. e.g. oxygen, food, drink 2. Safety (Security): Includes security and protection from physical and emotional harm. e.g. home, long-term work 3. Social (Belonging): Includes affection, belongingness, acceptance, and friendship. e.g. love, belonging to someone 4. Esteem: Includes internal esteem factors such as self-respect, autonomy, and achievement; and external esteem factors such as status, recognition, and attention. e.g. honour, prestige, reputation 5. Self-Actualization: The drive to become what one is capable of becoming; includes growth, achieving one s potential, and self-fulfilment Maslow suggests that the five need categories constitute a hierarchy. At the foundation of the hierarchy are physiological needs. An individual is motivated first and foremost to satisfy physiological needs. As long as they remain unsatisfied, the individual is motivated only to fulfil them. When satisfaction of these needs is achieved, they cease to act as primary motivational factors, and the individual moves up the hierarchy and becomes concerned with security needs. And so on. 27

28 Maslow separated the five needs into higher and lower orders. Physiological, safety and social needs are Esteem and self-actualization are described as described as lower-order. higher-order needs. These needs are predominantly satisfied These needs are satisfied internally. externally. Self-actualization personal growth and fulfilment Esteem needs achievement, status, responsibility, reputation Social needs family, affection, relationships, work group, etc. Higher order needs Lower Safety needs protection, security, order, law, limits, stability, etc. order Physiological needs basic life needs - air, food, drink, shelter, warmth, sex, sleep, etc. needs According to the Hierarchy-law a higher need influences our behaviour just when the lower need is satisfied. 28

29 As a need becomes substantially satisfied, the next need becomes dominant. No need is ever fully gratified; a substantially satisfied need no longer motivates. There were some extensions for this theory. Later Maslow integrated two more needs above the level of the self-esteem needs and one more need at the top in the adapted 8 levels. These are cognitive needs (to know, understand, and explain things, e.g. knowledge, meaning, self-awareness) and aesthetic needs (symmetry, order not a mass, e.g. beauty, balance, form). At the top there is transcendence: helping to others to self-actualize. Transcendence helping others to self-actualize Self-actualization personal growth, self-fulfillment Aesthetic needs beauty, balance, form, etc. Cognitive needs knowledge, meaning, self-awareness Esteem needs achievement, status, responsibility, reputation Social needs family, affection, relationships, work group, etc. Safety needs protection, security, order, law, limits, stability, etc. Physiological needs basic life needs - air, food, drink, shelter, warmth, sex, sleep, etc. Maslow s need theory has received wide recognition, particularly among practicing managers. Research does not generally validate the theory. Researches have revealed certain shortcomings and defects of this theory. Some research has found that 5 levels of need are not always present and that the order of the levels is not always the same as assumed by Maslow. Generally this theory is valid in individualistic cultures (for example in Europe, or North-America). In response to the similar criticisms, Clayton Alderfer has proposed an alternative hierarchy of needs called the ERG theory of motivation ERG Theory Clayton Alderfer reworked Maslow s need hierarchy to align it with the empirical research. His revised need hierarchy is labelled ERG theory. Alderfer argues that there are three groups of core needs. 29

30 The letters E, R and G stand for existence, relatedness and growth. Existence: Provides our basic material existence requirements. Relatedness: The desire we have for maintaining important interpersonal relationships. Growth: An intrinsic desire for personal development. The existence needs correspond to the physiological and security needs of Maslow s hierarchy. Relatedness needs focus on how people relate to their social environment. In Maslow s hierarchy they would encompass both the needs for belonging and external component of esteem. Growth needs include the needs for intrinsic component of esteem (self-esteem) and selfactualization. In addition to collapsing Maslow s five into three, Alderfer s ERG theory also differs from Maslow s in that: Maslow argued that an individual would stay at a certain need level until that need was satisfied. ERG argues that multiple needs can be operating as motivators at the same time. If one need is unsatisfied, another need can take its place. More than one need may cause motivation at the same time. There is no hierarchy of needs. ERG theory does not assume that there exists a rigid hierarchy. A person can be working on growth even though existence or relatedness needs are unsatisfied, or all three need categories could be operating at the same time. ERG theory also contains a frustration-regression dimension. ERG theory notes that when a higher-order need level is frustrated, the individual s desire to increase a lower-level need takes place Herzberg s Two-Factor Theory The Two-Factor Theory is sometimes also called motivation-hygiene theory. It was developed by psychologist Frederick Herzberg when he investigated the question: What do people want from their jobs? He asked 200 accountants and engineers in Pittsburgh, USA to describe - in detail - situations in which they felt exceptionally good or bad about their jobs. These interview responses were then tabulated and categorized. The traditional model of job satisfaction holds that satisfaction and dissatisfaction are at opposite ends of a single continuum. Employees might be satisfied, dissatisfied, or somewhere in between. But Herzberg s interviews had identified two different sets of factors; one ranging from satisfaction to a neutral level (no satisfaction) and the other ranging from dissatisfaction to a neutral level (no dissatisfaction). The factors influencing the satisfaction continuum called motivator factors are related specifically the work content. The factors presumed to cause dissatisfaction called hygiene factors are related the work environment. From the categorized responses, Herzberg concluded: Intrinsic factors, such as advancement, recognition, responsibility, and achievement seem to be related to job satisfaction. Dissatisfied respondents tended to cite extrinsic factors, such as supervision, pay, company policies, and working conditions. The opposite of satisfaction is not dissatisfaction. So removing dissatisfying characteristics from a job does not necessarily make the job satisfying. 30

31 Hygiene factors company policy and administration supervision payment and security interpersonal relationships working conditions source of dissatisfaction S P E C I F I C A T I O N S Motivator factors achievement recognition the work itself responsibility advancement and growth source of satisfaction W O R K I N C L U D I N G S Job satisfaction factors are separate and distinct from job dissatisfaction factors. Managers who eliminate job dissatisfaction factors may not necessarily bring about motivation. When hygiene factors are adequate, people will not be dissatisfied; neither will they be satisfied. To motivate people, emphasize factors intrinsically rewarding that are associated with the work itself or to outcomes directly derived from it. Although widely accepted by many managers, Herzberg s two-factor theory is not without its critics. Two examples of criticisms of the theory: The procedure that Herzberg used is limited by its methodology. The reliability of Herzberg s methodology is questioned McClelland s Theory of Needs The theory focuses on three needs: achievement, power, and affiliation. Need for achievement: The drive to excel, to achieve in relation to a set of standards, to strive to succeed. Some people have a compelling drive to succeed. They are striving for personal achievement rather than the rewards of success per se. This drive is the achievement need (nach). McClelland found that high achievers differentiate themselves from others by their desire to do things better. They seek personal responsibility for finding solutions to problems. They want to receive rapid feedback on their performance so they can tell easily whether they are improving or not. They can set moderately challenging goals. High achievers are not gamblers; they dislike succeeding by chance. High achievers perform best when they perceive their probability of success as They like set goals that require stretching themselves a little. Need for power: The need to make others behave in a way that they would not have behaved otherwise. This need (npow) is the desire to impact, to be influential, and to control others. Individuals high in npow enjoy being in charge. Strive for influence over others. Prefer to be placed into competitive rival and status-oriented situations. Tend to be more concerned with prestige and gaining influence over others than with effective performance. The signs of strong npow: stark, hotshot, aggressive, loud-mouth. 31

32 Need for affiliation (nafl): The desire for friendly and close interpersonal relationships. This need has received the least attention from researchers. Individuals with a high affiliation motive strive for friendship, love acceptation. Prefer cooperative situations rather than competitive ones. Desire relationships involving a high degree of mutual understanding. If we have strong nafl motive, then make hot personal contacts Process Theories They focus on the thought or cognitive processes that take place within the minds of people and that influence their behaviour Adam s Equity Theory J. Stacey Adams sought what role equity plays in motivation. An employee with several years experience can be frustrated to find out that a recent college get hired at a salary level higher than he is currently earning. This is causing decline of motivation levels. People are motivated to seek social equity in the rewards they receive for performance. The theory suggests that people view their outcomes and inputs as a ratio and then compare it to the ratio of someone else. This other person may be someone in the workgroup or some sort of group average or composite. The comparison looks like: Employees make comparisons of their job inputs and outcomes relative to those of others. If we perceive our ratio to be equal to the relevant others with whom we compare ourselves, a state of equity is said to exist. We perceive our situation as fair. When we see the ratio as unequal, we experience equity tension. 32

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