1. Chapter 3 Historical Foundations of Management

2. Historical foundations of management  Study questions What can be learned from classical management thinking? What can be learned from classical management thinking? What ideas were introduced by the human resource approaches? What ideas were introduced by the human resource approaches? What is unique about the systems view and contingency thinking? What is unique about the systems view and contingency thinking? What are continuing management themes of the 21st century? What are continuing management themes of the 21st century?

3. Major schools of management thought I. Classical management approaches Developing universal principles for use in various management situations. Developing universal principles for use in various management situations. II. Behavioral management (or human resource) approaches Human needs, the work group and social factors in the workplace. Human needs, the work group and social factors in the workplace. III. Quantitative management approaches Use of mathematical techniques for management problem solving. Use of mathematical techniques for management problem solving. IV. Modern approaches Systems and contingency views of organisations. Systems and contingency views of organisations.

4. I. Classical approaches to management  Three major branches within classical approaches: 1. Scientific management (Taylor and Frank and Lillian Gilbreths) 2. Administrative principles (Fayol and Follet) 3. Bureaucratic organisation (Weber)

5. Fig 4.1 Major branches in the classical approach to management Classical approaches Assumption: People are rational Scientific management Frederick Taylor Frank and Lillian Gilbreth Administrative principles Henry Fayol Mary Parker Follett Bureaucratic organisation Max Weber

6. 1. Scientific management  Frederick Taylor (Principles of Scientific Management) 4 Principles (for maximum prosperity of both) Develop for every job a ‘science’ that includes rules of motion, standardised work processes and proper working conditions for every job. Develop for every job a ‘science’ that includes rules of motion, standardised work processes and proper working conditions for every job. Carefully select workers with the right abilities for the job. Carefully select workers with the right abilities for the job. Carefully train workers to do the job and provide proper incentives to cooperate with job ‘science’. Carefully train workers to do the job and provide proper incentives to cooperate with job ‘science’. Support workers by carefully planning their work and removing obstacles. Support workers by carefully planning their work and removing obstacles.

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

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

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

10. 2. Administrative principles (conti.)  Mary Parker Follett (1933) – Dynamic Administration: The collected papers of Mary Parker Follett Emphasized role of groups and human cooperation Emphasized role of groups and human cooperation Groups are mechanisms through which individuals could combine their talents for a greater good. Groups are mechanisms through which individuals could combine their talents for a greater good. Organisations as cooperating ‘communities’ of managers and workers Organisations as cooperating ‘communities’ of managers and workers The manager’s job is to help people in the organisation to make them cooperate and achieve an integration of interests. The manager’s job is to help people in the organisation to make them cooperate and achieve an integration of interests.

11. Mary Parker Follett (conti.)  Forward-looking management insights Employee ownership creates sense of collective responsibility (precursor of employee ownership (stock options), profit sharing and gain sharing). Employee ownership creates sense of collective responsibility (precursor of employee ownership (stock options), profit sharing and gain sharing). Business problems involve a wide variety of interrelated factors (precursor of systems thinking). Business problems involve a wide variety of interrelated factors (precursor of systems thinking). Private profits should always be considered vis-à- vis the public good (precursor of managerial ethics and social responsibility). Private profits should always be considered vis-à- vis the public good (precursor of managerial ethics and social responsibility).

12. 3. Bureaucratic organisation (Max Weber) 19 th Century German sociologist 19 th Century German sociologist What should be the bases for exercising authority in the organizations What should be the bases for exercising authority in the organizations Three bases of Authority Three bases of Authority - Traditional authority - Charismatic authority - Legal-rational authority Theory of Bureaucracy Theory of Bureaucracy An ideal, intentionally rational and very efficient form of organisation. An ideal, intentionally rational and very efficient form of organisation. Based on principles of logic, order and legitimate authority. Based on principles of logic, order and legitimate authority.

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

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

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

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

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

18. 2. Maslow: theory of human needs A need is a physiological or psychological deficiency a person feels compelled to satisfy. A need is a physiological or psychological deficiency a person feels compelled to satisfy. Classified human needs into 5 levels Classified human needs into 5 levels Physiological Physiological Safety Safety Social Social Esteem Esteem Self-actualisation Self-actualisation Deficit principle: A satisfied need is not a motivator of behaviour. Deficit principle: A satisfied need is not a motivator of behaviour. Progression principle: A need becomes a motivator once the preceding lower-level need is satisfied. Progression principle: A need becomes a motivator once the preceding lower-level need is satisfied.

19. Fig 4.3 Maslow’s hierarchy of human needs 5. Self-actualization needs Highest level; need for self-fulfillment to grow and use abilities to fullest and most creative extent 4. Esteem needs Need for esteem in eyes of others; need for respect, prestige, recognition and self-esteem, personal sense of competence, mastery 3. Social needs Need for love, affection, sense of belongingness in one’s relationships with other people 2. Safety needs Need for security, protection and stability in the events of day-to day life 1. Physiological needs Most basic of all human needs: need for biological maintenance; food, water and physical wellbeing Self Actualization Esteem Social needs Safety and security Physiological

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

21. 3. McGregor’s Theory X and Theory Y Managers create self-fulfilling prophecies. Managers create self-fulfilling prophecies. Theory X managers create situations where workers become dependent and reluctant to assume responsibility. Theory X managers create situations where workers become dependent and reluctant to assume responsibility. Theory Y managers create situations where workers respond with initiative, high performance. And assume responsibility Theory Y managers create situations where workers respond with initiative, high performance. And assume responsibility

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

23. Fig 4.4 Organisations as complex networks of interacting subsystems Accounting and financial systems Purchasing and inventory systems Marketing, sales and distribution systems Information and technology systems Operations and service management systems Organisational Network of subsystems Inputs Suppliers Outputs Customers 23

24. IV. Systems Theory and Contingency Theories in Management  Contingency thinking Tries to match managerial responses with problems and opportunities unique to different situations Tries to match managerial responses with problems and opportunities unique to different situations No ‘one best way’ to manage No ‘one best way’ to manage Appropriate way to manage depends on the situation Appropriate way to manage depends on the situation

25. Fig 4.5 The organizational value chain Materials received and organize for use Customer s served Organization as a transformation system Management of the value chain Finished products distributed People and technology create products Resources and materials flow in

26. V. What are continuing management themes of the 21st century?  Quality and performance excellence Managers and workers in progressive organizations are quality conscious. Managers and workers in progressive organizations are quality conscious. Total quality management (TQM) Total quality management (TQM) Comprehensive approach to continuous quality improvement for a total organisation Comprehensive approach to continuous quality improvement for a total organisation Creates context for the value chain Creates context for the value chain

27. V. What are continuing management themes of the 21st century?  Eight attributes of performance excellence: 1. Bias towards action 2. Closeness to the customer 3. Autonomy and entrepreneurship 4. Productivity through people 5. Hands-on and value-driven 6. Stick to the knitting 7. Simple form and lean staff 8. Simultaneous loose-tight properties

28. V. What are continuing management themes of the 21st century?  Global awareness Pressure for quality and performance excellence is created by a highly competitive global economy. Pressure for quality and performance excellence is created by a highly competitive global economy. Has fostered increasing interest in new management concepts: Has fostered increasing interest in new management concepts: Process reengineering Process reengineering Virtual organizations Virtual organizations Agile factories Agile factories Network firms Network firms Adoption of Theory Z management practices Adoption of Theory Z management practices

29. V. What are continuing management themes of the 21st century?  Contemporary businesses must learn to become learning organizations.  Learning organization success depends on: culture that emphasizes information, teamwork, empowerment, participation and leadership culture that emphasizes information, teamwork, empowerment, participation and leadership special leadership qualities special leadership qualities

30. V. What are continuing management themes of the 21st century?  The 21st century manager must be: a global strategist a global strategist a master of technology a master of technology an effective politician an effective politician an inspiring leader an inspiring leader