Evolution of Management Thoughts

Arun Mishra

Definitions of Management 
Harold

Koontz & Heiz Weihrich defined management as ³the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims.´  Louis E. Boone & David L. Kurtz defines management as ³the use of people and other resources to accomplish objectives.´

Definitions of Management 
Delton E. McFarland defines management as ³a

process, by which managers create, direct, maintain, and operate purposive organizations through systematic, coordinated, cooperative human efforts.´  Mary Parker Fellot termed management as ³the act of getting things done through people.´

Management? 
Management is a set of activities including

planning and decision making, organizing, leading, and controlling, directed at an organization¶s resources (human, financial, physical, and information) with the aim of achieving organizational goals in an efficient and effective manner.

Some practical aspects of Management 
ll these definition suggest the following aspects

of management: 
Managers carry out the functions of Planning, organizing,

staffing, leading & controlling.  Management is essential to all kinds of organizations.  Management is necessary at all levels hierarchy.  The goal of all managers is to accomplish the objective of creating surplus.  The aim of managers is to improve productivity, efficiency ad effectiveness.

Evolution of the Management Thought
y Evolution dates back to human civilisation y Every human group needs management y Instances - Agricultural revolution ± 5000 BC y Egyptian civilisations, pyramids - 4000 BC y Ancient India - Harappa & Mohenjodaro ± 2000 BC y Italian trading houses: Introduction of double entry

book keeping ± 1300 and 1400 AD

y In the 19th century  - Industrial revolution  - Mass production  - Huge capital  - Ownership separated from management y 20th century  - World war I  - Limited resources available  - Need for solution to use them in an optimum way  - World War II added to the problem Thus, the issue of managing complex and huge business and growing competition forced us to develop systematic management concepts and principles

Bureaucratic Approach to ManagementMax Weber (1864 ± 1920)
y Max

Weber analyzed functioning of church, government, military and business organisations.

y He believed that bureaucracy was the most efficient

form of a business structure for any type of business organisation.

Features of bureaucracy Theory
y Administrative Class:
y This class exists in a bureaucratic organisation y The employees are full time and look after coordination

among activities
y Hierarchy:
y It is a system of ranking y Strict rules of authority-responsibility y Serves

lines of communication and delegation of

authority
y Division of work:
y Organisation divided in various departments y Each department will have a specific function y Clear definition of work

y Official Rules:
y Administrative process covered by rules y Antithesis to ad hoc y Provides stability and uniformity

y Impersonal Relationships
y Official relationships free from personal involvement,

emotions and y sentiments y Decisions are based on rational thinking
y Official Record:
y Maintenance of official records y Beneficial for future reference y Filing system used extensively

Scientific Management -Frederick W. Taylor (1856-1915)
y A worker and then a supervisor in steel company y Carried experiments to increase efficiency of the

workers y Published many books and papers y Studied M.E (Masters of Engineering) y His experiments are divided into
y Elements and tools of scientific management y Principles of scientific management

Elements and tools of scientific management
1. 2. 3. 4. 5. 6. 7. 8.

Separation of planning and doing-Supervisor plans, worker only carries out the task Functional foremanship- 4 types of supervisors for planning aspect, while 4 for supervision aspect of the work Job Analysis- best way to do a job Standardisation ± of process, period and amount of work, working conditions, tools used etc Scientific selection and training of workers Financial incentives Economy- optimum usage of resources an eliminate or reduce wastages Mental revolution ± cooperation between workers and the management

Principles of scientific management
y Replacing rule of thumb with science y Harmony in group actions y Cooperation y Maximum output y Development of workers

Critical Analysis of Scientific Management
y Relevant from an engineering point of view rather than

management point of view y Human aspect of the work was sidelined- workers got aggressive resulting in unhealthy competition y Increased authoritarian approach in industries- strict supervision y Financial incentives exploited the workers (Differential piece rate system)

Administrative Management ± Henry Fayol (1841-1915)
y Henry Fayol- French Industrialist y Used the term- Administration instead of Management y Divided industrial organisation into 6 groupsy Technical y Commercial y Financial y Security y Accounting y Managerial

y Identified qualities of a Manager

Managerial Qualities and trainingaccording to Fayol
y Physical- Health y Mental- ability to learn, judge, think, plan y Moral- loyalty, firmness, tact, dignity y Educational- acquaintance to subjects not related to

functions performed y Technical- pertaining to the function performed, eg, production y Experience- arising through work

Fayol¶s 14 principles of Management
1.

Division of work
To take advantage of specialisation, every worker/ manager works on a same part/function. It increases the accuracy, ability and speed of work.

2.

Authority and responsibility
Both are related. Authority arises out of a manager¶s position and responsibility, out of assignment of activity. Acc, to Fayol, there should be parity (equality) between both.

3.

Discipline
It can be self imposed, or commanded. Disciple by command arises through company policies.

4.

Unity in command
A person should get orders from only one superior. This increases clarity, reduces conflict and builds a personal responsibility for results If it is violated, discipline is lost, importance of authority decreases and stability is threatened.

5.

Unity of direction
Each group of activities with same objective, must have only one plan and one head. Unity in command defines the reporting relationship, while unity in direction defines the grouping of activities. It ensures better coordination among activities.

6.

Subordination of individual, to general interest
Interest of the organisation is more important than the interest of one/few employees, when there is a conflict between the two. Hence, superiors should be the ideals, supervise employees continuously and also have a fair agreement with them.

7.

Centralisation
An organisation must have a proper balance of centralisation and decentralisation, depending on its size, activities, objectives, employees etc.

8.

Remuneration
Should be fair to both- employee and employer In line with cost of living and value of employee Fayol did not advocate profit sharing plan for workers, but for managers

9.

Scalar chain
It is the flow of authority or command, through which every communication, must pass In special circumstances, this flow can be µshortcircuited¶ in situations, when the scalar chain of communication is non feasible. This is done, using a gang plank

10. Order

This refers to arrangement of things and people in an organisation - A place for everything and everything in place Similarly, the right person must be placed at the right position. This demands for precise knowledge of human requirement and resources
11. Equity

combination of justice and kindness It should be maintained in behaviour and treatment towards employees

12. Stability of Tenure

Employee should be given a minimum job security at least This ensures that he is given time to adjust to new work and succeed in it.
13. Initiative

Managers must encourage employees to take initiative, within the limits of their authority. It increases the zeal and energy in the employee
14. Espirit de Corps

Union is strength Managers must encourage the team spirit among the employees Erring employees must be given oral directions and not asked for a written explanation

The human relations approach ± Elton Mayo
y Conducted the famous Hawthorne Experiments carried out at

y y y y y

the Western Electric Company, in the United States of America that started in the early 1920s. In the approaches by Taylor and Fayol, the human element in the organisation was not stressed upon. The elements in these approaches were not giving evoking positive results. The Western Electric Company, Chicago had Hawthorne plant that manufactured telephone bell system The company was progressive, with sickness and pension benefits In spite of this, there was a dissatisfaction among workers.

y Experiment I: Two group of workers, experimented with

the lighting or illumination and its effect on productivity, showed no clear correlation between light level and productivity. y Experiment II: A girls group was chosen who worked in the telephone relay assembly department. 5 types of changes introduced over a period of time and productivity measured after every change. y Experiment III: 20,000 interviews conducted in two years to determine employee¶s attitude towards company, work, supervision, waged, insurance, incentives etc. y Experiment IV: 14 male workers were employed and hypothesis was that they would produce more in order to earn more. It was proved wrong due to 4 reasons given by workers for a lesser output.

Salient Features 
Focus on individual, his needs and behavior  Highlight interpersonal relations  Emphasis

on

motivation

morale

and

job

satisfaction  Conflict in an organization is always destructive and should be always avoided.  Based on Hawthorne experiments.  People behavior as a individual may be different than his behavior in a group.

Salient Features 
Emphasis on improving the working condition,

interpersonal relation, supervisory styles and communication systems.  People working in the organization may have different goals but it is the work of management to guide them toward the common goal.  People working in the organization form their own informal groups and these groups have a significant influence on the attitude and values of people.

Recap!
y Bureaucratic Approach ± Max Weber y Scientific Management Theory ± F.W.

Taylor y Administrative Management Theory ± Henry Fayol y Human Relations Approach ± Elton Mayo

Overview of Scientific, Administrative & Bureaucratic Approaches Focuses on the individual worker¶s productivity

Focuses on the functions of management

Focuses on the overall organizational system

The human relations approach ± Chester Barnard
y He

was the president of New Jersey Bell Telephone Company. y He saw organizations as social systems that required human cooperation. y He believed that managers¶ major roles were to communicate and stimulate subordinates to high levels of effort. y He also introduced the idea that managers have to examine the environment and then adjust the organization to maintain a state of equilibrium.

The human relations approach ± Chester Barnard
y He connected Scientific Management with Human

Relations. y Felt that executives serve two primary functions:
y Must establish and maintain a communications system

among employees. y Must establish the objectives of the organization and motivate employees.
y Developed an acceptance theory of authority:
y Authority of

a manager flows from the ability of subordinates to accept or reject an order from the manager once they: 
Comprehend what the order requires of them.  Review the order¶s consistency with organization goals.  Perceive a personal benefit in obeying the order.

Modern Approach to management 
Quantitative Approach  The Systems Approach  The Contingency Approach  The Japanese management

style (theory z)

Quantitative Approach
y Characterized by its use of mathematics, statistics,

and other quantitative techniques for management decision making and problem solving. y This approach has four basic characteristics:
1. A decision-making focus 2. Development of measurable criteria 3. Formulation of a quantitative model 4. The use of computers

y Decision-Making Focus
y The primary focus of the quantitative approach is on

problems or situations that require direct action, or a decision, on the part of management.

Quantitative Approach
y Measurable Criteria
y The decision-making process requires that the decision

maker select some alternative course of action. y The alternatives must be compared on the basis of measurable criteria.
y Quantitative Model
y To assess the likely impact of each alternative on the

stated criteria, a quantitative model of the decision situation must be formulated.
y Computers
y Computers are quite useful in the problem-solving

process.

Contributions of Quantitative Approach
y In Production Managementy Focus is on manufacturing technology and the

flow of material in plants. y In Operation Management y Focus is on organization such as hospitals, banks, government & the military.

Limitations of Quantitative Approach
y Despite its potential impact, this approach has

certain limitations:y Does not deal with the people aspect of an organization!!! y Unfamiliar with advanced quantitative tools!!

The Systems Approach
y System Defined
y A set of interrelated and interdependent parts arranged

in a manner that produces a unified whole. y An approach to problem solving based on an understanding of the basic structure of systems.

The Systems Approach
y Basic Types of Systems y Closed systems y Are not influenced by and do not interact with their environment (all system input and output is internal) y Open systems y Dynamically interact to their environments by taking in inputs and transforming them into outputs that are distributed into their environments

The Operating Model in Organizational System
Input Transformation Output

Feedback
INPUT TRANSFORMATION OUTPUT

Labour, Finances, Material, Information

Management & Production Process

Products/Services, Profit/Loss

Companies use inputs such as labour, funds, equipment, and materials to produce goods or to provide services and they design their subsystems to attain these goals.

The Contingency Approach
y Contingency Approach Defined
y Also sometimes called the situational approach. y There is no one universally applicable set of management

principles (rules) by which to manage organizations.
y Organizations are individually different, face different

situations (contingency variables), and require different ways of managing.
y Asserts that managers are responsible for determining

which managerial approach is likely to be most effective in a given situation.
y This requires managers to identify the key contingencies

in a given situation.

Blending Components into a Contingency Perspective

Assessment of Contingency Approach
y Useful because of its diagnostic approach, which

clearly departs from one of the best approach of traditionalist. y It is more flexible, although draw heavily from other approaches. y Allows managers to apply principles from those approaches selectively and appropriately.

Japanese Management Style Theory Z
y Theory Z is humanistic approach to management

approach by William Ouchi.
y Advocates trusting employees and making them feel like

an integral part of the organization.
y Based on the assumption that once a trusting relationship

with workers is established, production will increase.

The key features of Japanese industrial organizations:
y Offer lifetime employment (at least for their core workers). y Promote from within. y Insist on mandatory retirement of core workers at age 55. y Employ a large number of temporary employees mostly women. y There is a high degree of mutual trust and loyalty between

management and employees.
y Career paths are non-specialized with life-long job rotation as a

central feature of career development.
y Decision making is shared at all levels. y Performance appraisal is long term (ie the first appraisal takes place

10 years after joining the company).
y There is a strong sense of collective responsibility for the success

of the organization.
y And cooperation effort rather than individual achievement is

encouraged.

Management Challenges
y Increasing number of global organizations. y Building competitive advantage through superior

efficiency, quality, innovation, and responsiveness. y Increasing performance while remaining ethical managers. y Managing an increasingly diverse work force. y Using new technologies.

Henry L. Gantt
y A colleague of Taylor¶s at Bethlehem Steel Works y Implemented a wage incentive program.
y Gantt¶s incentive system provided bonuses for

workers who completed their jobs in less time than the standard.
y Initiated a bonus plan for supervisors. y Developed planning and control techniques using

a simple graphic bar chart , The Gantt Chart, to display relationships between planned and completed work on one axis and elapsed time on the other.
46

The Gilbreths (1868-1924)
Frank and Lillian Gilbreth refined Taylor¶s methods and made many improvements to time and motion studies, and industrials efficiency & were early contributors to personnel management.

47

The Gilbreths
y Frank and Lillian Gilbreth refined Taylor¶s

methods.
y Made

many improvements to time and motion studies.

y Time and motion studies:

Break down each action into components. y 2. Find better ways to perform it. y 3. Reorganize each action to be more efficient.
y 1.

y Gilbreths also studied fatigue problems,

lighting, heating and other worker issues.

Behavioral Management
y Focuses on the way a manager should

personally manage to motivate employees. y Mary Parker Follett: an influential leader in early managerial theory.
y Suggested

workers help in analyzing their jobs for improvements. y The worker knows the best way to improve the job. y If workers have the knowledge of the task, then they should control the task.

The McKinsey approach to problem-solving
y McKinsey's problem-solving process

has three pillars:
y Fact-based y Rigidly structured y Hypothesis driven

Facts
y Facts are the foundation of problem solving. y Facts aid in the development of a sound hypothesis,

and then provide the evidence needed to support or refute it. y Facts compensate for the lack of instinct a consultant must face since he or she does not have a lifetime of experience in the industry on which to draw. y Facts also bridge the credibility gap, lending respect to the analysis of newcomers. y Hiding from the facts is only a recipe for failure, because sooner or later, the truth will show itself. y Thus, a successful consultant will find the facts and use them to his or her advantage.

MECE
y One of the most fundamental tenants of McKinsey

problem solving is the concept of MECE, mutually exclusive, collectively exhaustive. y MECE can be used when developing and listing issues related to the problem at hand. y First, the associate must ensure that the list is mutually exclusive, or that every item is separate and distinct. Then, he must check that it is collectively exhaustive, that it includes every issue relevant to the problem. y This approach prevents overlap and confusion.

The Initial Hypothesis
3rd pillar of the McKinsey problem-solving process is the initial hypothesis (IH). y The initial hypothesis serves as a roadmap toward the solution. y It is the solution that seems most probable early in the engagement, after the group has brainstormed using their knowledge of the situation, but before they have spent a lot of time gathering additional information and analyzing. y The initial hypothesis may or may not prove correct, but it will provide a starting point from which to work and it will guide the research and early data analysis.
y The

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