Strategic Management

Chapter 2

Management Yesterday and Today

What does history tell us about management?

 Organised endeavours have existed for thousand of years

o E.g. the pyramids and the arsenal of Venice (warships on the canal,
filled at with various things at various stops along the canals)
 Two important historical events:
o Adam Smith’s Wealth of Nations published
 Outlines the economic advantages of the division of labour
 The division of labour or job specialisation = the breakdown
of jobs into narrow and repetitive tasks
 Increased productivity by increasing individual workers
skill and dexterity
 Save time lost in changing tasks
o The Industrial Revolution = the advent of machine power, mass
production and transport efficiency
 18th century Great Britain
 Change from the manufacturing of goods in homes to in
factories
 The need for formal management theory was established

The 6 Main Approaches to Management

1. Scientific Management
2. General Administrative Theory
3. Quantitative Approach
4. Organisational Behaviour
5. Systems Approach
6. Contingency Approach

What is scientific management?

 Scientific Management = the use of scientific method to define the ‘one

best way’ for a job to be done
 Important contributors:
o Frederick W. Taylor:
  Clear guidelines for improving production efficiency
 Four principles of management
1. Develop a science for each element of an
individual’s work, which will replace the old rule-of
–thumb method
2. Scientifically select, then train, teach and develop
the worker (previously, workers chose their own
work and trained themselves as best they could)
3. Heartily cooperate with the workers so as to ensure
that all work is done in accordance with the
principles of the science that has been developed.
4. Divide work and responsibility almost equally
between management and workers. Management
takes over all the work for which it is better fitted
that the workers are. (Previously, almost all the
work and the greater part of the responsibility were
thrown on the workers)
 Pig-iron experiment
 Put the right person on the right job
 With the correct tools and equipment
 Had the worker follow his instructions exactly
 Motivated the worker with economic incentive
o Frank and LilianGilbreth
 Used motion pictures to study ways eliminate wasteful hand
and body movement
 Invented microchronometer – recorded a workers motions
and the amount of time spent doing each motion
 Therbligs = a classification system for labelling 17 basic
hand motions
 Still used today to improve efficiency
o To hire best qualified workers and design incentive schemes based
on output

What is general administrative theory?

 General Administrative Theory = Writers who developed more general

theories of what managers do and what constituted good management
practice
 Focuses more on the whole organisation
 Important contributors:
o Henri Fayol
 Directed attention at the activities of all the managers
 Argued that management was an activity common to al
human endeavours in business, government and home
 14 principles of management
 Principles of management = the fundamental rules
of management that could be taught in schools and
applied in all organisational situations
 1. Division of work (specialisation)
2. Authority
3. Discipline (employees obey and respect)
4. Unity of command (orders from one superior)
5. Unity of direction
6. Subordination of individual interests to the general
interest
7. Remuneration (workers paid fairly)
8. Centralisation (degree to which employees involved
in decision making)
9. Scalar chain (chain of authority from top to bottom)
10. Order
11. Equity
12. Stability of tenure of personnel (provide
replacement personnel when necessary)
13. Initiative
14. Esprit de corps (promoting team spirirt and building
harmony)
o Max Weber
 Studied organisational activity
 Developed a theory of authority structures
 The ideal structure = bureaucracy
 = a form of organisation characterised by division of
labour, a clearly defined hierarchy, detailed rules and
regulations, and interpersonal relationships
 Model structure for today’s organisations
 Still used today as part of many current management concepts
o Weber not as relevant in today’s society as it makes it difficult to
adapt to the dynamic environment

What is the quantitative approach to management?

 Using quantitative techniques to improve decision making: also known as

operations research and management science
 Developed after the war as many military techniques to resolve problems
were applied to business
 Involves application of statistics, optimisation models, information models
and computer simulations
 Still used today, especially in planning and control
o In budgeting, scheduling and quality control
o Not as much influence as organisational behaviour

What is the organisational behavioural approach to management?

 Organisational behaviour (OB) is the study of people at work

o Early advocates (Owen, Munsterberg, Follett and Barnard)
  Believe that people are the most important aspect of the
organisation and should be managed accordingly
 Employee selection procedures, employee motivation
programs, employee work teams and organisation-external
environment management techniques

o Hawthorne Studies
 The most important contribution
 Started as a scientific management experiment and went
through several phases, including illumination phase and
group studies
 Stimulated an interest in human behaviour in organisations
o Although not based on any real research, the human relations
movement has some definite influence on management theory and
practice.
 Commitment to making management practices more
humane – more satisfied employees perform better
 Maslow (hierarchy of needs) and McGregor (theory X and
theory Y)
 Behavioural science theories
 Psychologists and sociologists who relied on
scientific method for the study of organisational
behaviour
o Behavioural approach has largely shaped how today’s
organisations are managed

What is the systems approach?

 Systems = a set of interrelated and interdependent parts arranged in a

manner that produces a unified whole
 Closed systems = systems that are not influenced by and do not interact
with their environment
 Open systems = systems that dynamically interact with their environment
 Organisations are made up of ‘interdependent factors, including
individuals, groups, attitudes, motives, formal structure, interactions,
goals, status and authority’
 These interdependent factors must work together in an organisation
 Organisations are not self-contained and rely on environment for essential
inputs and as sources to absorb their outputs
What is the contingency approach?

 No universally applicable management rules that would work in all

situations
o It all depends: ‘if, then’
 Different and changing situations require managers to use different
approaches and techniques
 Four contingency variables
1. Organisational size
2. Routineness of task technology
3. Environmental Uncertainty
4. Individual Differences (differ in terms of desire for growth,
autonomy, tolerance for ambiguity, expectations)

What are the current trends and issues impacting today’s managers?

 Globalisation
o No longer constrained by national borders
o Working with people from different cultures
o Coping with anti-capitalist backlash – economic values aren’t
universally transferable and must be modified to reflect the values
of the different countries in which the company operates
o Movement of jobs to countries with low-cost labour – not just
factory and call-centre workers, also includes well-educated
individuals capable of working in an information-based economy’
 Ethics
o Process for addressing ethical dilemmas
 What is the ethical dilemma?
 Who are the affected stakeholders?
  What personal, organisational and external factors are
important to my decision?
 What are possible alternatives?
 Make a decision and act on it.
 Workforce diversity
o = a workforce that is more heterogeneous in terms of age, gender,
race, ethnicity, age and other characteristics that reflect differences
o Brings a broad range of view-points and problem-solving skills
o Ageing population
 Entrepreneurship
o = the process whereby an individual or a group odindiiduals uses
organised efforts and means to pursue an opportunity to create
value and grow by fulfilling wants and needsthrough innovation
and uniqueness, no matter what resources are currently
controlled.
 E-business (enhanced, enabled, total)
o = a comprehensive term describing the wat an organisation does
its work by using electronic (internet) linkages with its key
constituencies in order to achieve its goals efficiently and
effectively
o E-commerce = any form of business exchange or transaction in
which the parties interact electronically
o Intranet = an internal organisational communication system that
sues internet technology and is accessible only by organisational
employees
 Knowledge management
o Learning organisations = organisations that have developed the
capacity to learn, adapt and change continuously
 Learning organisations
 Quality management
 Management sustainability