Theories of Management

The Evolution of Management

What Youll Learn

How the Industrial Revolution created a
new need for management.
How the captains of industry of the last
century created huge empires.
The principles of Scientific Management.
The results of the Hawthorne studies on
worker productivity.
Maslows Hierarchy of Needs

What Youll Learn contd

The difference between Theory X, Y, and Z
What TQM stands for and Demings 14 pts
Centralization and Decentralization
Japanese management concepts and
American management practices
Becoming familiar with modern management
principles will help you understand how
businesses function in todays environment.

The Industrial Revolution

Refers to the period during which a country

develops an industrial economy. In Europe the
Industrial Revolution began in the eighteenth
century; in the United States, it began around
1860, just before the Civil War.
Before the Industrial Revolution, the US economy
was based on agriculture. Most people worked on
small farms, using only simple technology, such
as horse-drawn plows. Professional managers
were not needed because most people worked for
themselves.

Captains of Industry

Toward the end of the nineteenth century,

powerful business people who created enormous
business empires dominated and shaped the US
economy. These captains of industry included
John D. Rockefeller (oil), JP Morgan (banking),
Andrew Carnegie (steel) and Cornelius Vanderbilt
(steamships and railroads).
During this period entrepreneurs founded
companies that later became industrial giants.
One of these companies was Bethlehem Steel. In
1863, the company began producing the first iron
railroad rails; by 1899, it was selling almost $1
trillion worth of iron and steel products in a year.

Management History

By the late 1800s, the US economy depended

largely on industries such as oil, steel, railroads,
and manufactured goods.
Many people left their farms to take jobs in
factories, where professional managers supervised
their work.
The new industrial enterprises that emerged in the
nineteenth century demanded management skills
that had not been necessary earlier.

Scientific Management
Frederick Winslow Taylor(1856-1915) was the
father of Scientific Management. When he was
working as an apprentice at the Midvale steel
company, he noticed that most workers did not
work as hard as they could. To increase
efficiency, Taylor tried to figure out the one
best way to perform a particular task. To do so,
he used a stop watch to determine which method
was the most efficient. These studies were
known as Time and Motion Studies.

Taylors scientific management was

based on four main ideas:
1.

Jobs should be designed according to

scientific rules rather than rule-of-thumb
methods. Employers should gather,
classify, and tabulate data in order to
determine the one best way of
performing a task or series of tasks.

2. Employees should be selected and trained

according to scientific methods. Employers
should also train employees in order to
improve their performance.

3. The principles of scientific management

should be explained to workers.
4. Management and workers should be
interdependent so that they cooperate.

Abraham H. Maslow
1908-1970
Maslow was a psychologist who developed a theory
of motivation. His ideas had a significant impact
on management. Maslow believed that
individuals fulfill lower-level needs before
seeking to fulfill higher-level needs. That is,
people satisfy their need for food before they seek
self-fulfillment. Because one set of needs must be
met before another is sought, Maslow referred to
this as a hierarchy of needs.

Maslows Theory

Applying Maslows Theory to

Management
At the lowest level, workers are motivated by basic needs,
such as the needs for wages or salary. Basic needs also
include the physical conditions in which a person works,
such as heating, lighting, and noise.
Once these basic needs are met, employers can address the
next level of needssafety or security needs. Some of
these security needs can be met by providing employees
with insurance, retirement benefits, and job security.
Employees need to know that in the workplace, they are
safe from physical, psychological, or financial harm.

Managers meet workers social needs by providing

work environments in which colleagues interact
by providing opportunities for co-workers to
socialize with one another by providing lunch
rooms or allowing employees to attend company
retreats.
Status needs can be met by providing employees
with signs of recognition that are visible to others,
such as job titles, awards, designated parking
spaces, and promotions.
Managers can meet employees need for selffulfillment by providing them with opportunities
to be creative at work or allow them to become
involved in decision making.

Theory X
MIT Professor Douglas McGregor
Theory Xassumes that people are basically
lazy and will avoid working if they can. To
make sure that employees work, Theory X
managers impose strict rules and make sure
that all important decisions are made only
by them.

Theory Y

Theory Y assumes that people find

satisfaction in their work. Theory Y
managers believe that people are creative
and will come up with good ideas if
encouraged to do so. They tend to give
their employees much more freedom and let
them make mistakes.

Theory Z
William Ouchi, a management researcher
developed this new theory of management
in the 1980s
Theory Z is a business management theory
that integrates Japanese and American
business practices. The Japanese business
emphasis is on collective decision making,
whereas the American emphasis is on
individual responsibility.

Japanese Type Organization

1.
2.
3.
4.
5.
6.
7.

Lifetime employment
Collective decision making
Collective responsibility
Slow evaluation and promotion
Implicit (understood, implied) control
mechanisms
Non-specialized career path
Holistic concern for employee as a person

American Type Organization

1.
2.
3.
4.
5.

6.
7.

Short-term employment
Individual decision making
Individual responsibility
Rapid evaluation and promotion
Explicit (clear, precise, unambiguous) control
mechanisms
Specialized career path
Segmented concern for employee as an
employee.

Theory Z Type Organization

1.
2.
3.
4.
5.
6.
7.

Long-term employment
Consentual, participative decision-making
Individual responsibility
Slow evaluation and promotion
Implicit, informal control with explicit,
formalized measures
Moderately specialized career path
Holistic concern, including family

The Hawthorne Effect

The result of an experiment conducted at the

Hawthorne plant of Western Electric in Cicero,
Illinois in 1924. They lowered the lighting in the
factory, expecting productivity to fall; but instead,
to their astonishment, productivity increased.
The researchers concluded that productivity rose
because workers worked harder when they
received attention. This phenomenon, in which
change of any kind increases productivity, has
been known as the Hawthorne Effect.

TQMTotal Quality
Management

Result of study conducted in the 1950s by W.

Edwards Deming who began studying how
companies ensure that the products they produce
are not defective. He came up with a
mathematically based approach to quality control
that became known as Total Quality Management,
which is a system of management based on
involving all employees in a constant process of
improving quality and productivity by improving
how they work. This approach focuses on totally
satisfying both customers and employees.

TQM
1.

2.

3.
4.
5.
6.

Demings Fourteen Points

Create consistent purpose for improving
products and services in order to remain
competitive.
Adopt a new philosophy. We are now living in
a new economic age.
Stop depending on mass inspection. Require
instead that quality is built in.
Consider quality as well as price in awarding
business.
Constantly improve the system of production
and service.
Institute a vigorous program of job training.

Demings 14 points contd

7.
8.
9.
10.

11.

Adopt and implement leadership. Focus on

quality, not productivity.
Drive out fear so that everyone may work
effectively.
Break down barriers between departments.
Eliminate numerical goals, posters, slogans, for
the work force that ask for new levels of
productivity without providing new methods.
Eliminate work standards that prescribe
numerical quotas.

Demings 14 points contd

12. Remove barriers that stand between the hourly
worker and his or her right to pride of
workmanship.
13. Encourage education and self-improvement for
everyone.
14. Create a structure in top management that will
work every day to achieve the above 13 points.
Most companies that have adopted TQM found that
the performance of their companies improved.

International Management
Thailand
The social culture of Thailand has given rise
to highly centralized corporations with strict
lines of authority. Self-managed teams
would not be a viable management style
because workers are used to taking direction
from leaders whose authority is absolute
and based on status.

Japanese Management Practices

Japanese managers encourage more employee
participation in decision making.
Japanese managers show deeper concern for
the personal well-being of their employees.
Rather than present their workers with
demands, Japanese managers tend to
facilitate decision making by teams of
workers.

Japanese Business Practices contd

Japanese business practices have been successfully
exported to the United States at Hondas plant in
Marysville, Ohio. Unlike most American plants,
where there is a clear distinction between workers
and managers, all Honda employees are
empowered to make decisions. As a result, Honda
employees are energetic and committed to
producing high-quality products. They turn out
one Honda Accord per minute. This high level of
productivity is attributed to several innovative
(new, original, groundbreaking) management
practices, where workers are organized by teams
rather than by function.

HERZBERGS
Motivation-Hygiene Theory
Psychologist Frederick Herzberg believed that:
Intrinsicnatural, realfactors are related to
job satisfaction &
Extrinsic factors are related to job
dissatisfaction.

Herzbergs Theory contd

On the other hand, when employees were

dissatisfied, they tended to cite extrinsic factors
such as company policy and administration,
supervision, interpersonal relationships, and
working conditions.
Herzberg suggested emphasizing motivators
those factors that increase job satisfaction, such as
recognition and growth.

Hygiene Factors

Herzbergs term for factors such as:

Working conditions and Salarywhen these factors
are adequate, people will not be dissatisfied, but
neither will they be satisfied.
These factors may eliminate job dissatisfaction but
do not necessarily increase job satisfaction.
Herzberg proposed that his findings indicate that the
opposite of satisfaction is no satisfaction and the
opposite of dissatisfaction is no dissatisfaction.

Herzbergs Theory

He believed that an individuals attitude toward

his or her work can very well determine success or
failure
Intrinsic factors such as achievement, recognition,
and responsibility were related to job satisfaction
When people felt good about their work, they
tended to attribute these characteristics to
themselves.

David McClellands
Three-Needs Theory

The three needs are the major motives in work:

The need for Achievement: (nAch) The drive to excel,
to achieve in relation to a set of standards, and to strive
to succeed.
The need for Power: (nPow) The need to make others
behave in a way that they would not have behaved
otherwise.
The need for Affiliation: (nAff) The desire for friendly
and close personal relationships.

Findings of McClellands Theory

McClelland found that some people have a compelling drive

to succeed for personal achievement rather than for the
rewards of success.
High achievers perform best when they perceive that they
have a 50-50 chance of success.
They dislike gambling when the odds are high because they
get no satisfaction from happenstance (fluke or accidental)
success
They also dislike low odds (high probability of success)
because then there is no challenge to their skills.
They like to set goals that stretch themselves a little.

J. Stacey Adams Equity Theory

Adams theory that employees perceive what they

get from a job (outcomes) in relation to what they
put into it (inputs) and then compare their inputoutcome ratio with the input-outcome ratios of
relevant others.
If workers compare themselves, a state of equity
exists.
They believe that their situation is fairthat
justice prevails.