The Leading Edge Forum Rethinking Management and Employee Engagement

A Brief History of Management Theory

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Management, as a practical, everyday activity, originated as far back as man in

his hunter-gatherer phase, organising effective ways of achieving collective
goals in a highly co-ordinated manner.

The linguistic origins of the word “management” lie in the Latin word for
“hand”. In the sixteenth century, management had come to mean the act of
controlling (“bringing to hand”) a horse or a wild animal. Ever since, the word
has had strong connotations of control.

Management, as a theoretical discipline, dates back only to the end of the

nineteenth century, when the first large industrial companies were founded,
and the pressing problems of coordinating and controlling large numbers of
people in the pursuit of a common set of goals first became apparent.

At about the same time, the first business schools were established in the
United States to develop a normative theory of organisational administration.

A theory of management was felt to be necessary if the workplace were to be

efficient and effective. Good theories, by linking causes to effects to yield a
predictive model, can dramatically enhance the efficacy of practice.
Management will be worthy of being called a profession only if it is based on a
reliable and well-validated theory; and a field of study will be deemed
theoretical only it yields law-like generalisations that relate particular forms of
practice to calibrated levels of performance.

The ideal model is either engineering or medicine. Management theorists

have attempted to create a set of organisational principles that would stand to
management practice much as physics relates to engineering or biology to
medicine.

Over the last century or so, many theoretical approaches have been adopted
to make sense of organisational behaviour, particularly the manner in which
they are effectively administered. We shall divide these approaches into five

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“schools of management”: the classical, human relations, open systems, social

action and contingency schools.

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The Classical School

The classical school, including writers such as Frederick W Taylor in America,

Henri Fayol in France and Lyndall Urwick in England, chose to analyse the
corporate organisation in terms of its purpose and structure. Theirs was a
normative theory, seeking to improve the efficiency of the organisation by
formulating rational rules of conduct.

Taylor, born in 1856, thought of himself as a scientist, bringing principles of

rational and logical behaviour into the design of the workplace. As the founder
of what he chose to call “scientific management”, he placed particular
emphasis on the technical specification of each person’s job and on the power
of monetary rewards to motivate each job holder. He believed that there was
“one right way” to perform any given task and that it was the prime
responsibility of management to discover and specify the optimal method and
then to ensure that it was followed to the letter. He advocated breaking a job
down into its elemental parts, timing each part, and then reconfiguring the
elements in a way that minimised time and maximised efficiency.

In a famous experiment during his time spent as a consultant to Bethlehem

Steel, Taylor showed how careful redesign of the job of handling pig iron could
increase productivity fourfold, justifying an increase in men’s wages by 60%.

Taylor believed that the rational re-engineering of the workplace would

dramatically enrich the world, including the workers whose energies were now
being applied in a far more efficient and purposeful manner. In this way, work
would become more rewarding, both financially and emotionally.

“Taylorism”, as it has become known, has, since its inception, received strong
criticism. It was said to drain work of its interest, to de-skill labour, to deny
people pride in the work they did, to treat working men as mindless automata
complying with the instructions given by others, and to place far too much
power in the hands of a small cadre of managers. Studies showed that men
who worked in these conditions felt demeaned and became resentful.
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Above all, “Taylorism” emphasised the importance of management to

productive working methods and effective organisation. It gave huge power to
managers in their relations with workers. It subjugated labour to capital, in the
sense that working people were treated merely as factors of production to be Page | 3
exploited (or “optimised”) in the interests of shareholder value. Taylor was
keen to deny labour discretionary choice as to how they work was done. He
was suspicious that they would put their interests above those of capital. For
example, he observed the practice of “systematic soldiering” whereby workers
conspired to keep managers in the dark as to how productive they could be if
they chose to be. As a result, he granted to managers the right (and indeed
the duty) to design every element of the workplace, every stage of every job,
and to take full responsibility for the ensuing performance of the company as a
whole.

The notion that human beings are “resources” descends directly from Taylor’s
concept of how management could be made “scientific”. The modern practice
of applying standard procedures, emulating best practice, demanding
compliance with company-wide processes, adopting world-class practices is,
for good or ill, a child of Taylorism. Management remains to this day imbued
with an instrumental view of the workplace, treating people as rational,
economic agents motivated by monetary gain linked to personal output. Each
person is a unit of production to be managed rather like a machine. Indeed,
scientific management is sometimes called the “machine theory model”.

Peter Drucker defended many elements of the Taylor model. Indeed, he

believed that, unknowingly, most managers today are heirs of many of his core
ideas. Widespread practices in the modern world, such as assembly line
working, time and motion studies, work design, organisation and methods,
performance standard manuals, performance-related pay, financial incentives
and bonus payments, management by exception, and production control are
all descendants of Taylor’s pioneering experiments and ideas. Drucker felt that
Taylor was motivated by good and wise intentions: in particular, the desire to
dramatically raise the wages of working people in line with increased
productivity, to make work less stressful and harmful by doing it the right way,
to train workers to higher levels of proficiency and greater levels of aspiration,

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and to eliminate the arbitrary decisions of a boss class in favour of a more

rational and defendable approach to working practices.

Drucker himself was highly influenced by Henri Fayol, one of the first writers to
try and describe management in terms of a fundamental set of activities or Page | 4

“elements” which he defined as: “to forecast and plan, to organise, to

command, to co-ordinate and to control”. Like Taylor, this betrays an
intrinsically autocratic view of the role of management. Many writers since,
such as Henry Mintzberg, have shown empirically that the actual day-to-day
activities of real managers do not accord at all with these theoretical
descriptions.

Working at the same time as Taylor but before Fayol, Max Weber, a German
sociologist, was interested in power and authority, and in particular, how
“bureaucratic structures”, as he chose to call them, placed constraints on the
arbitrary or unskilled exercise of power. He admired bureaucracy because of
its purely technical superiority over any other form of organisation. By
defining tasks and responsibilities within a clear, hierarchical structure of
management, work could be made rational, systematic and well-ordered.

For Weber, bureaucracy rested on four main pillars: specialisation, by which

work is divided into tasks that are typically more permanent than the
succession of persons who hold them; hierarchy, by which levels of authority
are stratified and defined, particularly as between management and workers;
rules, by which the operations of the organisation are defined and controlled,
leading to a stable, efficient and fair system; and perhaps most important of
all, impersonality, by which power and privilege are exercised, not arbitrarily
or at the whim of those in authority, but in accordance with an explicit,
rationally derived, published set of rules and procedures.

Weber’s advocacy of bureaucracy was rooted in his belief that administration

was best when it was grounded in expertise (rule of experts) and founded
upon discipline (rule of officials). In this way, decisions and actions were more
likely to be rational, transparent, uniform and aligned. Other systems, whether
aristocratic or feudal or paternalistic, tended to have less respect for expertise
or technical qualification and to rely instead upon “unearned” privilege, such
as accident of birth or social custom.

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Although working in very different traditions, and in different continents, the

ideas of Taylor and Weber have much in common. They spring from the
rational tradition by which everyday activities can be made more effective and
efficient through the application of logic, observation and argument. They are Page | 5
founded upon expertise, professionalism and objectivity. They are hostile to
sentiment, tradition and privilege.

Bureaucratic solutions to organisational design have their critics. The main line
of attack is that bureaucracies tend to inflexible, rule-bound and conservative;
and that bureaucrats themselves can be officious, status-conscious and
unresponsive. Because rules and procedures cannot, by definition, cover every
eventuality, they tend to stifle initiative and inhibit change. Sometimes, the
rules and procedures become ends in themselves, and a culture of “red tape”
takes over.

Critics of Weber argue that he neglected the informal organisation and the
ways in which individuals and groups pursue their own goals, invent their own
methods, and find ingenious ways of subverting the formal system. Others,
such as Chris Argyris, have argued that bureaucracies are antithetical to the
psychological development of the individual. They draw upon only a small part
of human potential. They crowd out creativity, autonomous choice, a sense of
responsibility, commitment, self-control and innate ambition. Working in a
bureaucracy can all too often become a dehumanising experience. Simon
Caulkin has suggested that organising around the task rather than the person
has the effect of reducing each person’s horizon to the confines of his own
small plot, at the expense of the larger purpose of the enterprise. Robert
Merton has noticed the development of a “bureaucratic personality” for which
a fixation on rules leads to dysfunctional rituals such as “goal displacement”,
the habit of sacrificing overall purpose to short-term compliance.

The Human Relations School

The classical school, with its bias towards the rational, quasi-scientific design of
organisational structure, job content and working methods, tended to ignore
the psychological dimension of those working in these environments and
adhering to these principles. The truth is that people are not machines,
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subject solely to the will of the designer. They like to feel in control of their
own behaviour. They take positive enjoyment in variety and they relish
exercising their own imagination and ingenuity. They are happy to adopt
challenging assignments and to take responsibility for the result. Setting to Page | 6
one side people’s feelings, preferences and aspirations in the cause of
simplicity, efficiency and perfection can all too often be self-defeating.

In the 1920s, many observers of organisational behaviour noticed just how

important these personal, human attributes were to work efficiency and group
performance. The Great Depression had brought home to many people the
critical importance of the social dimension of work and the role of human
relations in the workplace. The Hawthorne experiments, conducted for the
most part at the Western Electric Company between 1924 and 1932, led by
Elton Mayo, are some of the most important empirical investigations ever to
have been conducted into the nature of the working environment and the
causes of high performance. These researchers became known as the Human
Relations School of Management.

From these experiments, it became clear that the quality and integrity of social
relationships at work were critical to performance. Neglecting the
fundamental significance of work groups, styles of leadership, quality of
communication, sources of personal motivation, and inter-personal relations
was, it was argued, to omit the most critical performance variables of all.
Whereas the classical writers had taken the perspective of management,
looking at organisational effectiveness through the eyes of those in authority,
the human relations school adopted the perspective of those whose jobs were
subject to the design decisions of managers, that is, the vantage point of the
workers on whom the performance of the whole enterprise ultimately
depended. In contrast to the classical school’s emphasis on raising
organisational performance by rationalising the workplace, the human
relations schools stressed the imperative of humanising it.

It did this by recognising the informal organisation as the true living heart of
the enterprise. Employees, they believed, are the true architects of the
organisation that actually gets work done. They set the rules and values by
which they do their work. They form the groups in which collaborative work is
performed. They combine forces in the ways they want. They set the
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performance standards and regulate the pace of work. They discover the best
ways of accommodating the requirements of managers and the formal
structures of the organisation. They choose their own level of commitment to
the corporation. Loyalty tends to be directed to colleagues and fellow workers Page | 7
rather than to the boss or to the company. People prefer to work for each
other rather than for the goals set by those ostensibly in power. Even the
lowliest person has his own dignity and takes pride in owning his own decisions
and judgments.

Human Relations theorists showed that the reasons people go to work and the
rewards of doing so are diverse. For most employees, earning a living is only
part of the package. Work meets social and emotional as well as financial and
physiological needs. Freud notes that work is an effective mechanism for
keeping us sane. People go to work to socialise, to find a common cause to
serve, to belong to a group, to serve as a member of team, to gain respect and
social esteem, to make friends, to feel useful, to keep out of harm’s way, to be
occupied and to keep busy. Denis Pym once observed that “work is a front for
living”.

In the 1940s the humanistic approach was given a boost by the work of
Abraham Maslow. He was interested in individual development and personal
motivation. He put forward a hierarchical model of human needs. Only when
the “lower needs” were satisfied do individuals progress to the fulfilment of
their “higher needs”. He suggested five levels of need, from basic physiological
requirements at the lowest level, through needs for safety, love, esteem and,
at the highest level, self-actualisation. Organisational theorists adopted
Maslow’s model enthusiastically, seeing in it a normative model of effective
management and a blueprint for the idealised organisation. A high performing
company would be one, they suggested, that brought the maximum number of
its employees up to the top rungs of the hierarchy of needs.

F. Herzberg, working in the 1960s, extended and applied Maslow’s model

explicitly to the work environment. He defined two sets of variables
influencing job satisfaction and fulfilment at work. One set of variables were
what he called “hygiene” or “maintenance” factors that, if absent, led to
dissatisfaction at work and a sense of alienation. They related essentially to
the organisational context of the job, such as salary, job security, working
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conditions, level and quality of supervision, HR policies and interpersonal

relations. Another set of variables, that he termed “motivators” or “growth”
factors, were essential if work was to deliver satisfaction and fulfilment. They
related mainly to the work content of the job, such as sense of achievement, Page | 8
recognition, responsibility, nature of the work, and opportunities for personal
growth and development.

Like Herzberg, Douglas McGregor built on Maslow’s ideas as they apply to the
world of work. He identified and described two broad styles of management,
that he termed Theory X and Theory Y. Each took a different (and admittedly
extreme) view of human nature. Each view had dramatically different
implications for how management should be practised. McGregor himself
believed that Theory Y came much closer to the truth of human nature.

Theory X makes the assumption that people are basically lazy and therefore
shirk work if they can. They actively resist taking responsibility for anything if
they can, and would much prefer to take instructions from others. They lack
ambition and crave security above anything else. They are motivated only by
the lower levels of Maslow’s hierarchy: the need for pay and job security. For
these people, the appropriate management style is directive, coercive, and
controlling – a “carrot and stick” approach.

Theory Y takes the opposite line. It sees in people a natural desire to work and
to excel. People enjoy bringing their energy and ambition to work in the
service of a shared set of organisational goals to which they are happy to
subscribe if fairly remunerated for their efforts and achievements. They are
comfortable taking responsibility for themselves and directing their own lives.
Like everyone else, they can be creative, committed and conscientious in the
right conditions. They are motivated primarily by the higher levels of Maslow’s
hierarchy: by the need for affiliation, esteem and self-actualisation. For these
people, the right management style is the creation of those conditions in which
all employees serve the organisation’s goals by serving their own higher-level
needs.

The legacy of the human relations school is profound and can be found in any
successful firm. It includes a concern for job satisfaction and job enrichment,
empowerment strategies, learning and development activities, the promotion

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of self-management, climate surveys, internal communications and active

participation, group dynamics, and coaching styles of leadership.

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The Open Systems School

If the Classical bias was to study “organisations without people” and if the
Human Relations bias was to study “people without organisations”, then the
Open Systems School of Management chose to try and reconcile these
differences and produce a more coherent, more balanced model of effective
management.

Thinking of the organisation as a system allowed this school of writers and

researchers to treat the technical demands of a company alongside the
psychological and social needs of its employees. The systems approach
enables managers to think of the organisation as containing sub-systems, such
as departments and functions, as well as itself being part of a much larger
system, including the environment from which it drew its resources and to
which it offered its products and services. The idea is that each part of the
total system interacts with all the other parts and that the performance of the
whole can only be understood in terms of the interactions of the parts. The
Classical and Human Relations schools had tended to deal only with the
internal workings of the organisation itself.

In 1951, Ludwig von Bertalanffy, a celebrated biologist, had introduced the

notion of an “open system” as part of his General Systems Theory to analyse
the relationship of organisms to their environment. His idea was borrowed by
management scientists, such as Stafford Beer and Kenneth Boulding, to try and
make more sense of the business organisation as an open system interacting
with the environment, to which it was either well or poorly fitted. The firm
was analysed as a “mapping” of the market it strove to serve. It was modelled
as a socio-technical system, reconciling the commercial and human demands
being placed on it by customers and employees, respectively. The evolutionary
notion of “fitness” was sometimes used to explain the performance of the firm
in its marketplace.

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For example, working in the 1940’s at the Tavistock Institute of Human

Relations, E.L. Trist studied how changing technologies in the coal-mining
industry in Britain – in particular, the development of the “longwall” method of
extracting coal – had disrupted working relationships amongst the miners and Page | 10
had led to an increase in absenteeism, stress and scapegoating. Only by
changing the technology in a way that restored team-working and with it,
multi-skilled roles was it possible to make the investment in technology
financially lucrative.

Other writers have focussed on the intimate links between technology and the
social patterns of work. C.R. Walker and R.H. Guest looked at how assembly
line methods influenced the behaviour of employees; L.R. Sayles looked at the
relationship between technology and the nature of work groups; and R.
Blauner diagnosed problems of alienation in relation to various production
technologies.

In short, the Systems School emphasises the importance of the connections

and interdependencies between the component parts of the socio-technical
system that makes up the modern corporation. Not surprisingly, they often
compare the biological organism and the commercial organisation as
systemically alike. They believe that the latter has much more to learn from
the former than vice versa – a form of “biogenic learning”.

The Social Action School

In the 1960s, some behavioural scientists, particularly Goldthorpe, Fox and

Bowey, criticised organisational and managerial theory for failing to explain
individual behaviour in the workplace. By treating the organisation as the unit
of analysis, with its own ostensive goals, programmes and agenda, the Human
Relations School, quite as much as Taylorism, had failed to create the
methodological platform for predicting the behaviour of individual members
of these organisations. To the extent that these theories had tried to
accommodate the individual it was invariably as an “average” or “typical”
employee. Human nature was typically treated as a universal set of traits.

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The sociologists working within the Social Action school sought to analyse the
company from the perspective of the individual employee (the “actor”), each
with their perceptions of their own interests and opportunities. It is the
subjectivity of each person’s interpretation of their situation and their role Page | 11
that determines their behaviour. All experiences are mediated by meanings –
and these meaning are wholly personal to the individual whose actions and
behaviour are being modelled. Hence the importance of building a theory of
how people attach meanings to their work, to the organisation they work for,
and to the goals of the organisation itself. Social action theorists place the
individual’s own definitions of their situation and its possibilities at the heart of
their research.

Social Action theory tends to see the organisation, not as a unified group with
shared goals, common values and a single leader, but as competing factions,
each fighting their own corner and each loyal to different leaders and varied
objectives. The distinction that is drawn is between unitary and pluralistic
approaches to organisation. For social action theorists, the natural state of
most organisations is political and conflictual.

Bowey’s theory of social action is based on three core principles: 1) that the
explanation of individual behaviour requires the concept of “meaningful
action”; 2) that the actions that an individual takes are best understood from
the perspective of these meanings; and 3) that actions serve either to
reinforce or to modify these meanings.

The legacy of the Social Action school is its individualistic and eclectic
perspective on the organisation and the limited power that managers, who
are, of course, individuals themselves with their own agendas, can exercise in a
setting where people naturally form coalitions and interest groups that are
often at variance with the “officially” espoused aims and methods of the
formal organisation.

The Contingency School

Modern theorists of management have learned the hard way to be particularly

sceptical of anything that puts itself forward as a normative theory of business

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success, whether prescribing policy, structure, process, system or practice.

They point out that business is, in essence, a sophisticated game in which, by
definition, there cannot be such a thing as a winning strategy. Any theory
claiming to offer universal advice or formulae for success condemns itself as Page | 12
fraudulent science. The contingency approach to management finds a whiff of
this “quack medicine” in many theories of management, classical or otherwise.

Every business situation, like any game at any stage of play, is unique. The
next move in the game will always be a question of judgment, and never
simply adherence to a rule. Managers cannot escape from the fact that there
are no substitutes for first-hand thinking, or surrogates for subjective
judgment, or ready-made solutions. There can be no equivalent of “painting-
by-numbers” in the management of a company. The best decision will find its
rationale in the specificity of the prevailing situation. Business success is
inherently a singularity, and never simply a data point in a theory of how to
win.

Theorists who treat business management as more like cooking than chess – in
other words, capable of being turned into recipes – are committing a category
mistake. Over the last 20 years, particularly with a resurgence of interest in
strategic innovation, business school scholars have challenged the notion that
there can be such a thing as a science, or indeed a theory, of management at
all.

The contingency approach is a development of the systems approach, but it

goes a stage further by enumerating the countless environmental and
situational factors that have a bearing upon organisational design and
performance. The emphasis is upon flexibility.

The Demise of Management?

In the last few years, several writers have articulated a vehemently anti-
managerial stance, arguing that companies and government departments are
massively over-managed, or at least managed in a crude and heavy-handed
manner. Sumantra Ghoshal, in a sequence of articles for the Harvard Business
Review at the turn of the millennium, suggested that the bias towards

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management as strategy, structure and system needed to be radically

overhauled and replaced by an approach to management as purpose, process
and people. He has defined leadership as the art of creating in people a sense
of purpose, of identity, and of belonging. Richard Koch, in “Managing without Page | 13
Management”, argued that the modern world was characterised by six trends,
all of which are eroding the need for managers in large organisations. Peter
Drucker, just before he died, wrote an article, entitled “Managing Oneself”,
that sought to decentralise and devolve much more responsibility for decisions
and actions to the individual and away from the power structure. Jeffrey
Pfeffer, in “What Were They Thinking?” mocks the illusions and conceits of
modern managerial man. In “The Hopeless, Helpless, Hapless Manager”,
Adrian Furnham questions the psychological assumptions underpinning the
concept of management as it is currently practised. In a sequence of articles in
The Observer over many years, Simon Caulkin has written a brilliant series of
anti-management polemics. Last year, Gary Hamel wrote his authoritative
critique of modern-day management in “The Future of Management”.

Jules Goddard

August 2009

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