Theories of Managemenet -

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1 Theories of Managemenet - MANAGEMENT YESTERDAY AND TODAY momazic@efzg.hr Rewards/Challenges of Modern Manager The purpose of this lecture The knowledge of management history will help you understand contemporary management. It shows how the evolution of management concepts reflect the changing needs of organizations and society as a whole.

2 Historical Background of Management Ancient Management Egypt (pyramids) and China (Great Wall) Venetians (floating warship assembly lines) Adam Smith Published The Wealth of Nations in 1776 Advocated the division of labor (job specialization) to increase the productivity of workers Industrial Revolution Substituted machine power for human labor Created large organizations in need of management Development of Major Management Theories time Major Approaches to Management Scientific Management General Administrative Theory Quantitative Management Organizational Behavior Systems Approach Contingency Approach

3 Classical Management Perspective Includes both Scientific Management (USA) - Concerned with improving the performance of individual workers (i.e., efficiency). and General Administrative Theory (Europe) - A theory that focuses on managing the organization. Scientific Management Fredrick Winslow Taylor The father of scientific management Published Principles of Scientific Management (1911) The theory of scientific management Believed in selecting, training, teaching and developing workers. Using scientific methods to define the one best way for a job to be done: Putting the right person on the job with the correct tools and equipment. Having a standardized method of doing the job. Providing an economic incentive to the worker. Taylor s s Four Principles of Management 1. Develop a science for each element of an individual s work, which will replace the old rule-of-thumb method. 2. Scientifically select and then train, teach, and develop the worker. 3. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed. 4. Divide work and responsibility almost equally between management and workers. Management takes over all work for which it is better fitted than the workers.

4 Scientific Management (cont d) Frank and Lillian Gilbreth Focused on increasing worker productivity through the reduction of wasted motion Developed the microchronometer to time worker motions and optimize work performance Reduced number of movements in bricklaying, resulting in increased output of 200% Henry Gantt Developed other techniques, including the Gantt chart, to improve working efficiency through planning/scheduling General Administrative Theory Henri Fayol Wrote General and Industrial Management Believed that the practice of management was distinct from other organizational functions Developed fourteen principles of management that applied to all organizational situations First to describe management as planning, organizing, leading, and controlling Fayol s s 14 Principles of Management 1. Division of work 2. Authority 3. Discipline 4. Unity of command 5. Unity of direction 6. Subordination of individual interests to the general interest 7. Remuneration 8. Centralization 9. Scalar chain 10. Order 11. Equity 12. Stability of tenure of personnel 13. Initiative 14. Esprit de corps

5 General Administrative Theory Max Weber Developed a theory of authority based on an ideal type of organization (bureaucracy) where he emphasized: division of labor - predictability, reliance on rules and regulations - rationality, impersonality, inflexibility/rigidity employment based on expertise - technical competence, and hierarchy of authority Weber s s Ideal Bureaucracy Classical Management Perspective Today Contributions Laid the foundation for later developments Identified important management processes, functions, skills Focused attention on management as a valid subject of scientific inquiry Limitations More appropriate for traditional, stable, simple organizations Prescribed universal procedures not appropriate in some settings In some cases, viewed employees as tools rather than resources

6 Quantitative Approach to Management Quantitative Approach Also called operations research or management science Evolved from mathematical and statistical methods developed to solve WWII military logistics and quality control problems Focuses on improving managerial decision making by applying: Statistics, optimization models, information models, and computer simulations Quantitative Management Perspective Today Contributions Developed quantitative techniques to assist in decision making. Application of models has increased awareness and understanding of complex processes and situations. Has been useful in the planning and controlling processes. Limitations Cannot fully explain or predict behavior. Mathematical sophistication may come at the expense of other skills. Models may require unrealistic or unfounded assumptions. Behavioral Management Perspective Organizational Behavior (OB) The study of the actions of people at work; people are the most important asset of an organization Early OB Advocates Robert Owen Hugo Munsterberg Mary Parker Follett Chester Barnard

7 Early Advocates of OB The Hawthorne Studies Experimental findings Productivity unexpectedly increased under imposed adverse working conditions. The effect of incentive plans was less than expected. Workers established informal levels of acceptable individual output. Over-producing workers were labeled rate busters and under-producing workers were considered chiselers. Research conclusion Social norms, group standards and attitudes more strongly influence individual output and work behavior than do monetary incentives. Behavioral Management Perspective Human Relations Movement perspective that workers respond primarily to the social context of work Abraham Maslow posited a hierarchy of needs Douglas McGregor proposed Theory X and Theory Y concepts of managerial beliefs

8 Hierarchy of needs Theory X People do not like work and try to avoid it. People do not like work, so managers have to control, direct, coerce, and threaten employees to get them to meet organizational goals. People prefer to be directed, to avoid responsibility, and to want security; they have little ambition. Theory Y Work is a natural part of people s lives. People are internally motivated by commitment. People are committed to goals to the degree they receive rewards. People will seek and accept responsibility. People have the capacity to be innovative. People are bright, but mostly under-utilized. Behavioral Management Perspective Today Contributions 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 b that employees are valuable resources. Limitations Complexity of individuals makes behavior difficult to predict. Many concepts not put to use because managers are reluctant to adopt a them. Contemporary research findings are not often communicated to practicing managers in an understandable form.

9 The Systems Approach System Defined A set of interrelated and interdependent parts arranged in a manner that produces a unified whole. Basic Types of Systems Closed systems Are not influenced by and do not interact with their environment (all system input and output is internal). Open systems Dynamically interact to their environments by taking in inputs and transforming them into outputs that are distributed into their environments. The Organization as an Open System Rensis Likert Exploitive authoritative system (1) In this type of management system the job of employees/subordinates is to abide by the decisions made by managers and those with a higher status than them in the organisation. The subordinates do not participate in the decision making. The organisation is concerned simply about completing the work. The organisation will use fear and threats to make sure employees complete the work set. There is no n teamwork involved. Benevolent authoritative system (2) Just as in an exploitive authoritative system, decisions are made e by those at the top of the organisation and management. However employees are motivated through rewards (for their contribution) rather than fear and threats. Information may flow from subordinates to managers but it is restricted to what management want to hear.

10 Rensis Likert Consultative system (3) In this type of management system, subordinates are motivated by rewards and a degree of involvement in the decision making process. Management will constructively use their subordinates ideas and opinions. However involvement is incomplete and major decisions are still made by senior management. There is a greater flow of information (than in a benevolent authoritative system) from subordinates to management. Although the information from subordinate to manager is incomplete and euphemistic. Participative (group) system (4) Management have complete confidence in their subordinates/employees. ees. There is lots of communication and subordinates are fully involved in the decision making process. Subordinates comfortably express opinions ns and there is lots of teamwork. Teams are linked together by people, who are members of more than one team. Employees throughout the organisation feel responsible for achieving the organisation s s objectives. Implications of the Systems Approach Coordination of the organization s s parts is essential for proper functioning of the entire organization. Decisions and actions taken in one area of the organization will have an effect in other areas of the organization. Organizations are not self-contained and, therefore, must adapt to changes in their external environment. The Contingency Approach Contingency Approach Defined Also sometimes called the situational approach. There is no one universally applicable set of management principles (rules) by which to manage organizations. Organizations are individually different, face different situations (contingency variables), and require different ways of managing.

11 Popular Contingency Variables Organization size As size increases, so do the problems of coordination. Routineness of task technology Routine technologies require organizational structures, leadership styles, and control systems that differ from those required by customized or nonroutine technologies. Environmental uncertainty What works best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment. Individual differences Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and expectations. Current Trends and Issues Globalization Ethics E-business Knowledge Management Learning Organizations Current Trends and Issues (cont d) Globalization Management in international organizations Political and cultural challenges of operating in a global market Working with people from different cultures Coping with anticapitalist backlash Movement of jobs to countries with low-cost labor Ethics Increased emphasis on ethics education in college curriculums Increased creation and use of codes of ethics by businesses

12 A Process for Addressing Ethical Dilemmas Step 1: What is the ethical dilemma? Step 2: Who are the affected stakeholders? Step 3: What personal, organizational, and external factors are important to my decision? Step 4: What are possible alternatives? Step 5: Make a decision and act on it. Current Trends and Issues (cont d) Entrepreneurship Defined The process of starting new businesses, generally in response to opportunities. Entrepreneurship process Pursuit of opportunities Innovation in products, services, or business methods Desire for continual growth of the organization Current Trends and Issues (cont d) E-Business (Electronic Business) The work preformed by an organization using electronic linkages to its key constituencies E-commerce: the sales and marketing aspect of an e-e business Categories of E-BusinessesE E-business enhanced organization E-business enabled organization Total e-business e organization

13 Categories of E-Business E Involvement Current Trends and Issues (cont d) Learning Organization An organization that has developed the capacity to continuously learn, adapt, and change. Knowledge Management The cultivation of a learning culture where organizational members systematically gather and share knowledge with others in order to achieve better performance. Learning Organization versus Traditional Organization

14 division of labor (or job specialization) scientific management general administrative theory principles of management bureaucracy quantitative approach organizational behavior (OB) Hawthorne Studies system Terms to Know closed systems open systems contingency approach entrepreneurship e-business (electronic business) e-commerce (electronic commerce) intranet learning organization knowledge management