International management

Lecture 14
Ir. ing. Robert De Bruyn Office: Room 4.103 Building: R1 r.debruyn@fontys.nl 27th October 2008

Planning
 Planning consultancy meetings as of this week
See planning schedule in lecture 13

 Classical approaches to organisational analysis Machine thinking  Classical approaches to organisational analysis Organic approaches  Exercises

Organizations
Machine or Organism?

Machines
       Predictability Mechanical & electrical parts Depersonalised Plan or formula Engineers required Science Emotions, values, desires are removed  Social aspect of life removed

Key Proponents of Machine Thinking

 Frederick Taylor (1856 - 1915) - Scientific Management  Henri Fayol (1841 - 1925) - Administration  Max Weber (1864 - 1920) - Bureaucracy  Henry Gantt - Gantt Charts  Frank Gilbreth - Time & Motion Studies  Lilian Gilbreth - Systematic Recruitment & Selection

Organisations as Machines
 Organisational life is often routinized with the precision demanded by clockwork.  many organisations are designed like machines and employees are expected to behave as if they were parts of the machine.  McDonalds, Tesco & Disneyland are all to some extent examples of organisations using this approach.  Machine type organisations are often called bureaucracies.  Organisation derives from the Greek word oragon, meaning tool or instrument.

Examples
Can you think of an organisation that might display some of the characteristics of machine thinking?

Fundamental Principles of Scientific Management

 Workers should be set high targets.  Daily workloads should be specified after detailed examination of jobs.  Work environments should be carefully controlled.  Repetition of tasks develops speed, skill and high productivity.  Pay should be related to productivity.

Frederick W. Taylor
Taylor advocates five simple principles
 Shift all responsibility for the organisation of work from the worker to the manager.  Use scientific methods to determine the most efficient way of doing work specialisation  Select the best person to perform the job.  Train the worker to do the work efficiently.  Monitor worker performance constantly.

Frederick Taylor at Bethlehem Steel

Pig Iron If workers were moving 12 1/2 tons of pig iron per day and they could be incentivized to try to move 47 1/2 tons per day, left to their own wits they probably would become exhausted after a few hours and fail to reach their goal. However, by first conducting experiments to determine the amount of resting that was necessary, the worker's manager could determine the optimal timing of lifting and resting so that the worker could move the 47 1/2 tons per day without tiring. Not all workers were physically capable of moving 47 1/2 tons per day; perhaps only 1/8 of the pig iron handlers were capable of doing so. While these 1/8 were not extraordinary people who were highly prized by society, their physical capabilities were well suited to moving pig iron. This example suggests that workers should be selected according to how well they are suited for a particular job.
Source: http://www.netmba.com/mgmt/scientific/

Frederick Taylor at Bethlehem Steel

The Science of Shovelling In another study of the "science of shovelling", Taylor ran time studies to determine that the optimal weight that a worker should lift in a shovel was 21 pounds. Since there is a wide range of densities of materials, the shovel should be sized so that it would hold 21 pounds of the substance being shovelled. The firm provided the workers with optimal shovels. The result was a three to four fold increase in productivity and workers were rewarded with pay increases. Prior to scientific management, workers used their own shovels and rarely had the optimal one for the job.

Source: http://www.netmba.com/mgmt/scientific/

Taylors Assumptions of Human Nature

 In general people are mindless and need to be told what to do  People are principally motivated by money  People can be regarded as objects and managed accordingly

Henry Ford: 1913 Assembly line

Ford Motor Companys first moving assembly line was located in Highland Park, Michigan in 1913. Below, the exterior of the Ford building was used for mounting the auto body on the chassis. Ford Motor Company was one of the first manufacturing plants to use assembly lines to mass produce look alike automobiles. The process allowed Henry Ford to keep prices down and better control the quality of the automobile.

Frank and Lilian Gilbreth

 Husband-and-wife team and like Taylor pioneers in the study and practice of management.  They prompted (Encouraged) what became known as time and motion studies, the forerunner of the current field of industrial engineering.  The Gilbreths ultimately developed a list of seventeen basic motions called therbligs (Gilbreth spelled backwards almost)

Frank Gilbreth: obsessed with efficiency

To reduce the time it took him to shave in the mornings, Frank used two shaving brushes to lather his face and found that he could reduce shaving time by seventeen seconds. He tried shaving with two razors and found that he could reduce the total shaving time by forty-four seconds. But he abandoned this scheme because it took him two minutes to apply bandages to cuts. His children suggested that it was the two lost minutes that bothered him and not the cuts.

Another anecdote
Franks philosophy of sickness was to ignore it. He said, A sick person drags down the performance of the entire group ... You have been given health and its your job to keep it. Yet, in spite of his admonitions (Warnings), Frank was told that his tonsils needed to be removed. To enhance efficiency, he decided that as long as he was to have his tonsils out, the entire family would have their tonsils taken out at the same time. Frank even set up motion picture equipment to film the operating efficiency of the surgeon performing the tonsillectomies.

Lilian Gilbreth
 Focused on the psychology of management to complement her husband  One of the first working female engineers holding a PhD  She is arguably (proven) the first true industrial & organizational psychologist  Partnered together with Frank in a management consulting firm of Gilbreth, Inc. which performed time and motion studies

Contribution of Scientific Management to Organisation Theory

 Led to definition of roles, authority and responsibility in organisations  Provided a rational basis for separating and analysing organisational functions, also in doing vs. thinking  Emphasised the role of target setting  Stimulated interest in design of incentive systems e.g. performance based pay, share schemes
Taylor: "The old fashioned dictator does not exist under Scientific Management. The man at the head of the business under Scientific Management is governed by rules and laws which have been developed through hundreds of experiments just as much as the workman is, and the standards developed are equitable (Acceptable)."

Objections to Scientific Management

 Ignores the social & psychological needs of employees  Attention focused on operational rather than strategic management  Division of labour creates boredom (Annoyment) and dehumanises work  Can and has led to mass unemployment  Designed for large manufacturing economies (Service as well e.g. call centres)  Quickest way of performing a job is not always the best

Fayols Principles of Management

Fayol divided management into five activities: Planning (at the heart of his theory) Organizing Commanding Coordinating Controlling Where Taylor focused mainly on the worker level Fayol focused on the management level

Fayol: 14 basic management principles for achieving good organisation

2 Authority and Responsibility. Authority is 1 Division of Work. The intent of division of the right to give orders and obtain work is to produce more and better work for obedience, and responsibility is a corollary the same effort. Specialization is the most of authority. The two types of authority are efficient way to use human effort. official authority, which is the authority of command, and personal authority, which is the authority of the individual manager. 3 Discipline. Obedience to organizational rules and employment agreement is necessary. The best way to have good superiors and clear and fair rules and agreements is to apply sanctions and penalties judiciously. 5 Unity of Direction. All units in the organization should be moving toward the same objectives through coordinated and focused effort. 4 Unity of Command. There should be one and only one boss for each individual employee.

6 Subordination of Individual Interest to General Interest. The interests of the organization should take priority over the interests of any one individual employee.

7 Remuneration of Employees. The overall pay and compensation for employees should be fair to both employees and the organization.

8 Centralization. There is a need to balance subordinate involvement through decentralization with managers retention of final authority through centralization.

9 Scalar Chain. Organizations should have 10 Order. People and materials must be in suitable places at the appropriate time for a chain of authority and communication maximum efficiency. that runs from the top to the bottom and should be followed by managers and subordinates. 11 Equity. Good sense and experience are needed to ensure fairness to all employees, who should be treated as equally as possible. 13 Initiative. Workers should be encouraged to develop and carry out their plans for improvements. 12 Stability of Personnel. Employee turnover should be minimized to maintain organizational efficiency.

14 Esprit de Corps. Management should promote a team spirit of unity and harmony among employees.

Fayol put a tremendous emphasis on logic, rationality, and consistency

Bureaucracy - Max Weber

Basic principles
 A division of labor by functional specialization.  A well-defined hierarchy of authority.  A system of rules covering the rights and duties of employees.  A system of procedures for dealing with work situations.  Impersonal relations between people.  Promotion and selection based on technical competence.

The ideal type is the bureaucracy which achieves rationality

Weber on Bureaucracy
Three types of authority:  Rational - legal
 legality of patterns of normative rule  rights of those in authority

 Traditional
 sanctity of tradition  legitimacy of those exercising authority under tradition

 Charismatic
 devotion to specific & exceptional sanctity, heroism or exemplary character of an individual person  normative patterns of order stemming from leader

Advantages of bureaucracy
1. Employee behavior is consistent because of set policies, procedures, and rules. 2. Overlapping or conflicting job duties are eliminated because jobs are defined clearly. 3. Behavior is predictable because there is a hierarchy of authority (supervision). 4. Hiring and promotion are based on merit or expertise. 5. Employees develop expertise in their jobs because they specialize in those jobs. 6. There is continuity in the organization because it emphasizes the position rather than the person (that is, when one person leaves a position, another person assumes that same position).

Disadvantages of bureaucracy
1. There is too much red tape and too much paperwork. 2. Employees do not care about the organization. 3. Employees are treated impersonally (according to the rules). 4. Regulations result in conformity in behavior. 5. Relying on rules and policies stifles the growth of employees.

ISO 9000:2000

Modern form of bureaucracy???

Strengths of Machine Metaphor

 Much of our experience is machine thinking e.g. Schools  The one best way makes life easier  Traditional approach in medicine regards our bodies as machines  Machines work well where:
 programmed tasks  environment is stable  same product or process repeated each time  when human machine parts are compliant e.g. MacDonalds

Weakness of Machine Metaphor

 Can be difficult to promote change  Can result in mindless and unquestioning bureaucracy e.g. Nazi Germany  Ignores the informal processes and outcomes that can take precedent over formal goals  Dehumanising aspects:
      a cog in a wheel objectification depersonalisation reification use value human resources/capital

CONCEPT SUMMARY: Classical Theories

Approach
Scientific Management (Taylor, Gilbreth) Administrative Principles (Fayol) Bureaucratic Organization (Weber)

Rationale

Focus

One best way to do each Job level job One best way to put an organization together Rational and impersonal organizational arrangements Organizational level Organizational level

Assignment
1. The postal services in many countries are typical examples of bureaucracies. Explain why these companies chose such a perspective? 2. Can you give other examples of bureaucracies? 3. Are there different types of bureaucracies?

Organic Images of Organisation

      Brain Garden Island Forest Craft Studio Artists workshop What others can you think of?

Organisations as Organisms
 Organisations exist in a wider environment: open rather than closed systems  organisational form varies dependent upon environmental conditions  notion of organisation as an organism rooted in metaphor of biology:
 adaptation to environment  organisational health  organisational life-cycles  species of organisation  ecological considerations

Characteristics of a Biological System

 Living  Interacting with the environment (adapting & shaping)  Feeding, nourishing  Constituted by arrangement of internal parts  Requires equilibrium

Assignment
Imagine an organisation as a brocoli What does this metaphore tell you about an organisation? Can you give an example of an actual organisation that fits this metaphore?

Theoretical Positions
 Open Systems Theory  Human Relations  Contingency Theory

Open Systems Model

 organisations like organisms are open to their environment  organisations must achieve an appropriate relationship (equilibrium) with their environment  relationships with the task environment essential (e.g. customers, competitors, suppliers, unions, government etc..)  organisations are a set of interrelated subsystems that co-exist in a symbiotic relationship (e.g. molecules, cells, organs)

Characteristics of Open Systems

 Objects parts or elements (sub-systems)  Attributes qualities or properties  Relationships mutual effect & constraint  Environment: affected by surroundings

Systems Model of Business

Remember the Law of requisite variety of Ashby

Source: http://www.accel-team.com/business_process/systems_analysis_01.html

Contrasting Open & Closed Systems

A closed system :
 is independent of its environment  determines its own destiny  controls its internal relationships

An open system:
 is in continuous contact with its environment  transforms inputs from the environment into outputs returned to the environment  need to adapt to changes in the environment

Elton Mayo (1880 1949)

 Father of human relations movement  social man  democratic management  Leader of the Hawthorne studies (plant of Western Electric in Chicago)

Hawthorn studies
Illumination Experiment The initial experiment in the Hawthorne studies was an illumination experiment. In this experiment, workers performed their jobs under varying light conditions. As the lights were turned up or down, worker productivity rates were charted. Surprisingly, this study showed that whether lights were turned up or down, employee productivity increased. These researchers thus concluded that some factors other than light were responsible for the increased productivity.

Hawthorn studies
Relay Assembly Test Room Experiments Following the illumination experiment, some workers were placed in the relay assembly test room, and various experiments under different work conditions were conducted. As a result of these experiments, about 20,000 interviews were conducted. The Hawthorne researchers realized that people were not leaving their feelings, attitudes, and emotions at home. The employees were not at work simply for economic benefit. Other dimensions also affected their performance.

Hawthorn studies
Bank Wiring Room Experiment A final experiment was conducted in the bank wiring room with a small group of employees. In this study researchers discovered that the production quota set by the company (using scientific management techniques) was not the number of units actually produced by the workers. The researchers discovered that the workers had developed their own idea of the level of output that was fair. This informal standard of behavior, called a norm, was enforced by the work group to the point that output was restricted. Any worker who produced more than that number was pressured by coworkers to comply with the norm.

Social view of the Human relations approach

  Individuals are motivated by social needs. People obtain their sense of identity through interpersonal relationships. Because of industrial progress and routinization of work, work has become dissatisfying. Employees are more responsive to the social forces of peer groups than to incentives and controls of management. Employees respond to provisions for their social needs and acceptance offered by management.

Followers of Mayo
 Chris Argyris Organisational learning  Fred Hertzberg Motivation-Hygiene theory  Douglas McGregor Theory X Theory Y  Rensis Likert Likert Scale

Contingency Theory
 No one best way of organising or managing  Appropriate form of organising or managing depends on the type of task and the environment  Effective organisation depends on achieving a balance between:
 strategy  structure  technology  human need (s)  external environment

Strengths of Organism Metaphor

 Places emphasis on relations within an organisation  emphasises the needs/characteristics of different parts of the organisation  recognition of balancing parts of the organisation one part cannot dominate  by emphasising strategic choice it introduces a range of management options  emphasis on organic forms for innovation

Weaknesses of the Organism Metaphor

 Too much emphasis on the environment as concrete - the economic & political environment is socially constructed
 thus too much weight given to forces in the environment  what about the organisation being an active agent in constructing its world e.g. technological organisations impact on the way we live and work

 Organisations are not functionally unified i.e harmony - as found in biological systems
 perhaps unity cannot be achieved in organisational life  discounts power & politics in organisational life

CONCEPT SUMMARY: Modern Management Theories

Key Notion
Systems Contingencies Human Needs

Rationale
Organizations must be thought of as open systems. Managerial actions must be set up on a contingent basis. Organizations must be designed to consider a variety of individual needs.

Assignment
1. Analyse the organisation McDonalds from the machine metaphore and the organism metaphore (Group 1) 2. Please explain the level of success (and currently failure) of McDonalds globally? (Group 2) 3. To what extend are companies free to chose a certain configuration (machine organism)? (Group 3) 4. Dell can be seen as a virtual organisation. How do virtual organisations deal with the tension between rules and regulations on one side and freedom and entrepreneurship on the other side? (Group 4)

Weblinks
 http://www.accel-team.com/scientific/index.html  http://www.accel-team.com/motivation/index.html  http://www.accelteam.com/productivity/approaches_00.html  http://www.biz.colostate.edu/faculty/dennism/Manageme nt-Evolution.html  http://www.netmba.com/mgmt/scientific/