| A Part 1 The Basis of Global Management Theory and Practice One of the most important human activites is managing, Ever since people began forming groups the knowledge that wn to accomplish aims they could not achieve as individuals, managing has been essential to ensure the concepts, principles, t gndinaton of individual effort As society has come to rely increasingly on group effort, and as into these five funetio. pany organized groups have become very age, the tasks of managers have been gaining importance ‘This framework bi there are diferent wa ‘The purpose of this book is to promote excellence among all persons in organizations, especially among managers, aspiring managers, and other professionals.* ‘books and authors to after experimenting a DEFINITION OF MANAGEMENT: ITS NATURE AND PURPOSE ‘Although the empb designing an internal hicks ‘Management isthe process of designing and maintaining an environment it must never be ove! ~. vy _in which individuals, working together in groups, efficiently accomplish environment of an e1 aoeeerntd selected aims. However, this basic definition needs to be expanded: their tasks well unless Memeoaetdesin, * As managers, people carry Out the managerial functions of planning, the many elements of ing and raining an organizing, stafing leading, and controling social, ecological, pol ‘encionment inwhich ind- = “Management applies to any kind of organization operation. Moreover, vovss erg unine apples o manages at al orginal evel tres. Therefore, this | ~ aticdaniy 207 ‘© The ultimate aim of all managers is the same ~ to create a surplus complsh selected Ams. Nanaging is concerned with productivity, which implies effectiveness Management a: and efficiency Here are some managers you may know: late Steve Jobs at Apple Inc ‘Managers are charge NOt Ratan Tata (etd) ofthe Tata Group (now Cyr Pll Mistry; Richard a we Branson of Virgin Group, Bill Ford, Jr, at Ford Motor Company and his agement hs a maenens successor, Alan Mulally Jack Welch of General Electric and his succes- not-for-profit enterp: ae tor, Jeff Immelt; isco’ John Chambers; and Bill Gates of Microsoft ‘The term enterprise ‘vr frd.com and his successor, Steve Ballmer. One of the most powerful managers is university; and other _woww.ge.com Barack Obama, President of the United States of America. The Gover- written in this book r ‘wwncscocom nor of the State of California, Jerry Brown and his predecessor, Arnold Bfecve manageme ‘weumirosef.com Schwarzenegger, are also managers. Middle-evel managers and first-line ‘supervisors, however, also make important contributions to the goal of hospital administrato the baseball manage! their organizations. Alla manage organizations, We define an organization asa group of people working together Managerial Fur oe cme) Lubouecte ec Sasol quaint ate i mbites ot aedeed aden eat rio Leone Se ees | eee nae, orig servce to ta cmp el plese eetrater| ; : Te ay be ke ‘The Functions of Management ieee Many solr snd manages have found thatthe arb of management is faced bya wef aid group ender: paste clear organization of knowledge. In studying management, therefore, itis helpful to break it down into five managerial functions—planning, organizing, staffing, leading, and controlling —around which ee relative time spent fc time on planning ar ee oon the other hand, t ‘Ac tics the em nw mang wed in eleence to perzos who have no suborinaes Tha, non managers nel professionals aierenite in the 9 \eho may hee igh state im organsaios. reeCchopter 1 Management: Science, Theory, and Practice 7 sple began forming groups the knowledge that underlies those functions ean be organized. Thus, the Note cen essential to ensure the concepts, principles, theories, and techniques of management are grouped . ly on group effort, and as into these five functions in this book. Five managerial functions + been gaining importance, “This framework has been used and tested for many years. Although around which manager! there are different ways of organizing managetal knowledge, most text-kowedge fs organized in books and authors today have adopted this or a similar framework even ti book planing, o92- afer experimenting at mes with alternative ways of structuring knowledge. Wz, safig, en, 2 organizations, especially E “Although the emphasis in this book is on managers’ tasks that pertain to 4 Contoing, designing an internal environment for performance within an organization, Siaaiag sn etvizoamene Fiat heree beleetiogked that ceanisget eaiae! erate he eternal Note Ps, efficiently accomplish ‘environment of an enterprise as well. Clearly, managers cannot perform | z ads to be expanded: thei tasks well unless they have an understanding of, and are responsive to Extemal elements that t- al functions of planning, the many clements of the external environment—economic, technological, fos opto: esmomc, social, ecological, political, and ethical factors—that affect their areas of Ket eee a tion sperrdon. Moreover, many oxpunizons'aow operse in dffenent con ir ee vels, tries. Therefore, this book takes a global perspective of managing, to create a surplus rich implies effectiveness Management as Element of any Organization Steve Jobs at Apple Inc; ‘Managers are charged with the responsibility of taking actions that will ery 3 Pallonji Mistry); Richard ‘enable individuals to make their best contributions to group objectives. “4 i ‘Motor Company and his Management, thus, applies to small and large organizations to profit and ‘ lava! basatece. porforprofit enrrprees to manafacsring os well w service indurtics. (Riga Gate trent Bill Gates of Microsoft “The term enterprise refers to a business, government agency, hospital, agen, hosp uner- t ost powerful managers is university, and other types of organizations because almost everything sly, and other types of q af America The Govee: ‘writen in this book refers to business as well as nonbusiness organizations. organizations. k tis pesicodasary Acad Effective management is the concern of the corporation president, the t | managers and first-line hospital administrator, the government first-line supervisor, the Boy Scout leader, the church bishop, le the baseball manager, and the university president. i ributions to the goal of Managerial Functions at Different Organizational Levels people working together onprofit organizations, J shis book no basic distinct es = ee In this book no basic distinction is made between managers, executives, administrators, and supervi- Sirgen sre "ato pn an ny ier coon racmin sn onpaaion > erie ecienwell es ff between various types of enterprises. Similarly, the scope of authority held may also vary and the types of problems dealt with may be considerably different. Furthermore, the person in a manage- | rial role may be directing people in the sales, engineering, or finance department. However, the fact remains that, as managers, all must obtain results by establishing an environment for an effective facilitated by a useful and group endeavor. hhelpfal to break i down, ‘All managers carry out managerial functions. However, the time spent’ | Note trolling —around which for each function may differ. Figure 1.1 shows an approximation of the r ‘relative time spent for exch function. Thus, top-level managers spend mote managers car out time on planning and organizing than do lower-level managers. Leading, » managerial fancins, but onthe other hand, takes a great deal of time for first-line supervisors. The he me spentor each ‘imager inclideprofesicels difference in time spent on controlling varies only slightly for managers at _funefon may de. ‘vasous levels.—_—_—_—y dress several global issues in | perspectives throughout the ‘imperative has become more to increase employment and Wl find that entreprencusial their success and survival in Of identifying market op. cd and bring value toc aleviate people’ pain (eg, ce their own lives through +5) while creating economic 'y file seéks to understand * discovered, created and =preneurial centers around progress for mankind. We ide range of management develop a hi ook, realized esiyran Love to Slcon Vatey ship. The Silicon Valley Xpertiso to guide these w ventures nid also recognize the age It 0 promote suc. it Slicon Valley to do rity of San Francisco he unique Siicon Vat. sting edge fims, and Argentina, Peru, and leam the Siicon innovation the Silicon —___. Chapter 1 Manogement: Science, Theory, and Proctice 23 Productivity, Effectiveness, and Efficiency Another way to view the aim of managers is that they must raise productivity. After World War TI, the United States became the world leader in productivity. But in the late 1960s, productivity growth began to decelerate. Today, the urgent need for productivity improvement is recognized around the ‘world by governments, industry, and universities. Often one looks to Japan to find answers to our productivity problem (a subject to be considered later in Chapter 3), but what tends to be overlooked is the importance of effectively performing basic managerial and non-managerial activites. Definition of Productivity Successful companies create 2 surplus through productive operations si6te Although there is no complete agreement on the true meaning of pro- ie ductivity, let us define it as the output-input ratio within a time period with due consideration for quality It can be expressed as follows: “The eputrput rao Ovrpurs : win atime ped with Productivity = (within a time period, quality considered) ue consideration ior Tapats ‘The formula indicates that productivity can be improved by (1) increas- ing outputs with the same inputs, (2) decreasing inputs but maintaining the same outputs, or (3) increasing outputs and decreasing inputs to change the ratio favorably Companies use several kinds of inputs, such as labor, materials, and capital, Total-factor productiv- ity combines various inputs to arrive at a composite input. In the past, productivity improvement programs were mostly aimed at the worker level. Yet, as Peter F. Drucker, one of the most prolific ‘writers in management, observed, “The greatest opportunity for increasing productivity is surely to bbe found in knowledge work itself, and especially in management.”"® Definitions of Effectiveness and Efficiency Productivity implies effectiveness and efficiency in individual and orga- ies nizational performance. Effectiveness is the achievement of objectives. - Efficiency is the achievement of the ends with the least amount of re- Effectiveness. sources. Effectiveness alone is not sufficient unless a firm is also efficient The achievement of in meeting its objectives. For example, an organization may achiewe its Objetves. ‘goal through an inefficient method which would result in higher costs Not and a noncompetitive product or service. Similarly, an enterprise may be > very efficient in achieving sub-optimal goals and miss the market entirely. ffilency ‘Therefore, a high-performing company must be both effective and ef The achievement of ficient. Managers cannot know whether they are productive unless they the ends with he least fst know ter gals and those of the organization, a ope ta wl be SMOBL A ORE. discussed in Chapter 4Chapter 1 Management: Science, Theory, and Practice 15 = | SH} | tible 1.1 summarizes the major contributions of management writers and practitioners!” We will | highlight Prederick Taylors scientific management, Henri Fayol's modern operational management theory, and Elon Mayo and FJ. Rocthlisberger's Hawthorne studies Magazine published is Frederick Taylor and Scientific Management ms that were listed on a ' (Frederick Winslow Taylor gave up going to college and started out as an ‘apprentice pattern maker and machinist in 1875, joined the Midvale Steel Company in Philadelphia as a machinist in 1878, and rose to the postion ro) of chief engineer after earning a degree in engineering through evening study, He invented high-speed stecl-cutting tools and spent most of his life ’ as a consulting engineer. Taylor is generally acknowledged as the father of scientific management. Probably no other person has had a greater impact 1 on the early development of management. His experiences as an apprentice, ver the preceding three + common labore, a foreman, a master mechani, and then the cit eng Fedak W.Tevor neer ofa tel company gave Taylor smple opportnity to kaow firsthand qq,!50,"2 | the problems and attitudes of workers and to sce the great possibilities for Sermes, Ghicage) impeoving the quay of management. ; pees F “The Emergence of Management Thought é > . ne, music composition, n art. It is know-how. BE renege Scientific management P Meigen tin Frederick W. Taylor Shop Management (1903) Acknowledged as the father of scientific manage: = cg ccs Principles of Scientific Managemen: (1911) Test-- ment. His primary concer was to raise product f stig Pace i Tey be te Spel! Moss Conndsee (1912) ty though reer ciety In proction and. | fe may be referred e inereased pay for workers by applying the scientific fe >t mutually exclusive; ‘method. His principles emphasize using science, : ceatlog iar ea ation achlasiag ological sciences. To . ‘maximum output, and developing workers = many variables that Henry L. Gantt (1901) | __ Called fr scientific selection of workers and “harmo nvledge can certainly rhovs cooperation” between labor and management. ! be little more than Developed the Gantt chart (Chapter 19). Stressed the = Nee must trust Iu Se eee aa Frank and Lillian Gibreth (1900) Frank is known primarily for his time and motion nd error (and it has hey can turn to for wctice,, ‘Modern operational management theory Henri Fayol Administration Industrielle et Générale (1916) studies. Lillian, an industrial psychologist, focused fon the human aspects of work and the understaring ‘of workers" personalities and needs. ~ Referred to as the father of modem management theory. Divided industrial activities into six groups: technical, commercial, financial, security, accounting, ent approaches to and managerial. Recognized the need for teaching pter, you will learn ‘management. Formulated 14 principles of manage- ntangle the jungle. ment, such a8 authority and responsibility, unity of ‘command, scalar chain, and esprit de corps. ContinuedNNN 2 to industry and manage- ‘Yo advertising, marketing, Of the social systems ap- sd management. ‘thom plan of the Wester influence of socal attitudes ‘soups on performance, yris, Robert R. Blake, C. 8.G.C. Homans, Harold ‘Herbert Simon, George any general management in Japan. ‘cople get promoted to a petent se managerial practices ment. ‘companies they consid- ‘vore competency ofthe de fim asa portfolio of an a colletion of busi- Yanagers to identify and se advantage sed view of the fm” 49 sustainable competi- 8 which ofits resources 'y and hard to substrte Porate growth, temen! Thought (Englewood ‘Ghopter1 Management: Science, Theory, and Practice 17 “Taylors famous work Prinape of Scone Management was published in 1911, The fundamental principles that Taylor saw underiying the scientific approach to management ate as follows 1 Replacing rules of thumb with science (organized knowledge) = Obtaining harmony rather than discord in group action = Achievement of cooperation as opposed to chaotic individualism =» Working for maximum output rather than restricted output Developing all workers to the filles extent possible for their own and their company’s highest Prosperity You will notice that these basic precepts of Taylor are not far from the fundamental beliefs of the modern manager. Henri Fayol, the Father of Modern Management Theory Perhaps the real father of modern management theory is the French industrialist Henri Fayol. He recognized a widespread need for principles snd managernent teaching, Consequently, he identified 14 such principles, toting that those are flexible, not absolute, and must be usable regardless of changing conditions. Let us look at some of these principles: © Ascaris and raponsibiy. Fayol suggests that authority and respon- sibility are related, with the latter arising from the former. He sees authority as a combination of official factors, deriving from the manager's position, and personal factors, “compounded of intel ligence, experience, moral worth, past service, etc.” 8 Unity of command. Employees should receive orders from one su- perior only. 1 Sealer chan, Fayol thinks of this a8 aan of superiors” from the highest to the lowest ranks, whieh, while not to be departed from ncedlestly, should be short-circuited when following it scrupulously would be detrimental 1 Enprit de corp. This isthe principle that “in union there is strength” (Ronald T. Greenwood) " as well as an extension uf the principle of unity of command, emphasizing the need for teamwork and the importance ‘of communication in obtaining it FFayol regarded the elements of management as the functions of planning, organizing, commanding, coordinating, and contolling Elton Mayo and F. J. Roethlisberger and the Hawthorne Studies Elon Mayo, FJ. Roethlisberger, and others undertook the famous experiments at the Hawthorne plant of the Western Electric Company between 1927 and 1932 Earlier, from 1924 to 1927, the National Research Council made a study in collaboration with Western Electric to determine the effect of illumination and other conditions on work- crs and their productivity. Finding that productivity improved when illumination was either increased or decreased for a test group, the Elton Mayo 1880-1940 (Baker Library, Harvard University Graduate School of Business Administration)| | | | Chapter 1 Management: Science, Theory, and Practice 29 swho are the reason for the existence of virtually’all businesses, are outside a company, It is through the communication system that the needs of customers are identified; this knowledge enables the fam to provide products and services ata profit Similarly, itis through an effective communication system thatthe organization becomes aware of competition and other potential threats and constrain- ing factors External Variables Eifective managers will regularly scan the external environment, It is true that managers may have litle of no power to change the external environment, yet they have no alternative but to respond to it. The forces acting in the external envionment are discussed in various chapters, especially in Chapters 2, 3, and 5. Outputs Itis the task of managers to secure and utilize inputs to the enterprise to transform them through the managerial functions —with due consideration for external variables—into outputs. Although the kinds of ousputs will ‘ary with the enterprise, they usually include many of the Following: prod- ucts, services, profits, satisfaction, and integration of the goals of various ‘caimants to the enterprise. Most of these outputs require no claboration, and only the last two will be discussed. ‘The organization must indeed provide many “satisfactions” if it hopes to retain and illcit contributions from its members. It must contribute to the satisfaction not only of basic material needs (eg, employees’ needs to earn money for food and shelter of to have joh security) but also of the needs for affiliation, acceptance, esteem, and perhaps even self-actualization so that one can realize one’s potential at the workplace. ‘Another output is goal integration. As noted earlier, che different claimants fo the enterprise have very divergent —and often ditectly opposing—objectives. It is the task of managers to resolve conflicts and integrate these aims. Reenergizing the System : Finally, it is important to note that, in the systems model of the management process, some of the ‘outputs become inputs again, Thus, the satisfaction and new knowledge or skills of employees be- come important human inputs, Similarly, profits, che surplus of income over costs, are reinvested in cash and capital goods, such as machinery, equipment, buildings, and inventory. You will see shortly that the model shown in Figure 1.6 will serve as a framework in this book for organizing managerial knowledge, But, let us first look closer at the managerial functions. THE FUNCTIONS OF MANAGERS “The functions of managers provide a useful structure for organizing management knowledge (see the central part of Figure 1.6). There have been no new ideas, research Findings, or techniques that cannot readily be placed in the clasiications of planning, organizing staffing, leading, and controllingPart 1 The Basis of Globo! Monogement Theory and Practice Planning involves selecting missions and objectives as well as the actions to achieve them; it requires decision-making, which is, choosing future courses of action from among altetnatives. As Chapter 4 will show, there ate various types of plans, ranging from overall purposes and objectives to the most detailed actions to be taken, such as ordering a special stainless steel bolt for an instrument ot hiring and training workers for an assem- bly line, No real plan exists until a decision—a commitment of human ‘or material resources—has been made, Before a decision is made, all that ‘exists is a planning study, an analysis, or a proposal; there is no real plan. “The various aspects of planning are discussed in Part 2 of this book. Organizing People working together in groups to achieve some goal must have roles 10 play, much like the parts actors fill in a drama, whether these roles are the ‘ones they develop themselves, are accidental or haphazard, or are defined land structured by someone who wants to make sure that they contribute in a specific way to group effort. The concept of a role implies that what people do has a definite purpose or objective; they know how their job objective fits into the group effort, and they have the necessary author- ity, tools, and information to accomplish the task. This can be scen in as simple a group effort as setting up camp on a fishing expedition. Everyone could do anything he ot she wants to do, but activity would almost certainly be more effective and certain tasks would be less likely to be left undone if one or two persons were given the job of gathering firewood, some the assignment of getting water, others the tsk of starting fire, yet others the job of cooking, and s0 00. Organizing, then, is that part of managing which involves establishing an intentional structure of roles for people to fil in an organization. [cis intentional in the sense of making sure that all the tasks necessary to accomplish goals are assigned and, it is hoped, assigned to people who can do them best. “The purpose of an organization structure is to help create an environment for human perfor- ‘mance. It is then a management tool and not an end in and of itself. Although the structure must define the tasks to be done, the roles s0 established must also be designed in light of the abilities and motivations of the people available. Designing an effective organization structure is not an easy managerial task. Many problems are encountered in making structures fit situations, including both defining the kinds of jobs that must bbe done and finding the people to do them. These problems and the essential theories, principles, and techniques of handling them are the subjects of Part 3. i Staffing Staffing involves filling, and keeping filled, the positions in the organization structure, This is done by identifying workforce requirements; inventorying the people available; and recruiting, selecting, placing, promoting, apprais ing, planning the ea and current jobhokc with in Part 4, Leading Leading isinfiuenci and group goals; iF of managing. Ali ma arise from people— individuals and in ge to be effective leade tend to follow those and desires, itis unde styles and approache Controlling Controlling is mea performance to ens ing performance ags standards exist, and } controlling facilitate ‘must precede contro rs in the use of rest checked to determin Control activities ling lke the budget ally familia. Each 0 persist, corrective ac the organization. B ot buying according for these functions. sponsible for results performance. Thus, in Pat 6. Coordination, : Some authorities cos curate, however, tor efforts toward the a contributing to coor Even in the case « in different ways, ar‘Ghopter 1 Management: Science, Theory, ond Practice 31. ing, planning the careers of, compensating, and training or otherwise developing both candidates ‘and current jobholders so that tasks are accomplished effectively and efficiently: This subject is dealt jectvesaswelas the actions fA 3 which is, choosing fare ie ‘S Chapter 4 wll show, there | Leading Al purposes and objectives to | 7 ‘ordering a special stainless __(Leading is influencing people so that they will contribute to organizational ining workers for an assem- | Bd group goals; it has to do predominantly with the interpersonal aspect a commitment of human | of managing, All managers would agree that their most important problems i © a decision is made, all that arise from people—their desires and attitudes as well as their behavior as posal; there is no real plan. individuals and in groups—and the fact that effective managers also need to be effective leaders. Since leadership implies followership and people tend to follow those who offer means of satisfying their own needs, wishes, snd desires, it is understandable that leading involves motivation, leadership styles and approaches, and communication. The essentials of these subjects are dealt with in Part 5. ‘ome goal must have roles to ‘whether these roles are the i s haphazard, or are defined iets te sure that they contribute Controlling is measuring and correcting individual and organizational Of a role implies that what performance to ensure that events conform to plans. It involves measur- i they know how their job ing performance against goals and plans, showing where deviations from hhave the necessary author- standards exist, and helping to correct deviations from standards. In short, i ask. This can be seen in as controlling facilitates the accomplishment of plans. Although planning re could do anything he or must precede controling, plans are not self-achieving, Plans guide manag- certain tasks would be less ‘ers in the use of resources to accomplish specific goals; then activities are ering firewood, some the checked to determine whether they conform to the plans. jeb of cooking, and 50 on ‘Control acivites generally relate eo the mesgurement of achievement. Some means of control 2g an intentional structure ling, like the budget for expenses, inspection records, and the record of labor-hours lost, are gener- of making sure that all the ally familia. Each of these measures indicates whether plans are working out or not. If deviations ed to people who can do ‘persist, corrective action must be taken. Of course, corrective actions must be made by people in the organization, But what is corrected? Nothing can be done about reducing scrap, for example, fament for human perfor. ‘or buying according to specifications, or handling sales returns unless one knows who is responsible hhough the structure must for these functions. Ensuring that events conform to plans, means locating the persons who ate re sein light of the abilities sponsible for results that differ from planned action and then taking the necessary steps to improve performance. Thus, outcomes are controlled by controlling what people do. This subject is treated task, Many problems are in Part 6. € kinds of jobs that must ential theories, principles, Coordination, the Essence of Management ——— —- some authorities consider coordination to be a separate faction of the manager. It seems more ac- curate, however, to regard it asthe essence of management for achieving harmony among individual efforts toward the accomplishment of group goals. Each of the managerial functions is an exercise sitions in the organization contributing to coordination. “quirements; inventorying [Even in the case of a church or a fraternal organization, individuals often interpret similar interests sing, promoting, apprais- «in different ways, and their efforts toward mutual goals do not automatically mesh with the effortsPort 1 The Basis of Global Management Theory and Practice others, It, thus, becomes the central task of the manager to reconcile differences in approach, ming, effort, or interest and to harmonize individual goals to contribute to organizational goals. Managers or Leaders—That is the Question While some scholars make 2 distinction between managers and lead- crs (with managers often depicted less favorably), we sugyest that good managers certainly need to be competent leaders. We also maintain that ‘ood leaders must be able to direct, oversee and occasionally carry out effectively the managerial functions of planning, organizing, staffing, controlling and, of course, leading, Fred Luthans, in his chapter, “Great Leaders: An Evidence-Based Approach,” uses the term ieades and manages interchangeably. Specifically, be argues “this chapter on leadership styles, activities, and skils are also on management styles, activites, and skill, contending that managing and leading is closely intertwined. This book, therefor, is about management with special attention given to the leadership aspects of managing, THREE MANAGEMENT PERSPECTIVES: GLOBAL, INNOVATIVE, AND ENTREPRENEURIAL In previous editions of this book, we viewed management from the global perspective. With the inereasing demands in the global competitive environment, we have added the innovative and en- trepreneutial perspectives in this book. Many management issues have global, innovative, and entre preneurial dimensions. Therefore, the managerial perspectives throughout the text can be discussed from several viewpoints. The Global Perspective “This edition continues the tradition of viewing management from a global perspective which re- quires an understanding of the social, political, legal, and environmental forces across national and regional boundaries that influence managing Managers must develop their knowledge, attitude, and skills necessary to operate in the international environment. Managers need to understand not only the forces in the developed countries, but also those in emerging and developing countries. Since the economies of China and India play vital roles in the world economy, this book will illustrate many management issues in those nations. ‘The innovative Perspective Note Innovation is one of the most important element in improving govern- ments and businesses tis the driver for succeeding in today’s competitive environment. Indeed, innovation often means the difference between the success and failure of an organization. Innovation is important for en- terprises (business and nonbusiness alike) as well as societies. There is no complete agieement on the term innovation. We define innovation as zt enbancement, adaption, or commerializaton of new produas servis, or proces ‘The Fast Compan) haps of litle surpr Other highly ronke “Twitter ranks next. and socal intitutc ranked twelfth, Tes Sedan, ranked tht known for product Many ofthe reade competion from A ‘Starbucks overe 28 its “Jobs for Us | on health and w "Hospitals in india n response to Mothe duality specialty ce The mind map t Fast Company. Wr noted for their cont ‘companies, but sot by the Pad case a tanPort2 Planning are now familiar with the basic management theory and have been introduced to the five es tial managerial functions: planning, organizing, staffing, leading, and controlling In Part 2 of this 3, we shall discuss planning. ‘In designing an environment for the effective performance of individuals working together in a ‘group, a manager's most essential task i to see that everyone understands the group's mission and Objectives and the methods for attaining them. If group effort isto be effective, people must know ‘what they are expected to accomplish, This is the function of planning, It is the most basic of all the managerial functions. Planning involves selecting missions and objectives and deciding on the actions to achieve them: it requires decision-making; that is, choosing a course of action from among alternatives, Plan, thus, provide a rational approach to achieving prese- lected objectives. Planning also strongly implies managerial innovation, as will be discussed in Chapter 6. Planning bridges the gap from where we ae to where we want to go. Its also important to point that planning and controlling are inseparable—the Siamese twins of management (see Figure 41), Any attempt to control without plans is meaningless, since there is 1no way for people to tell whether they are going where they want to go (the result of the task of control) unless they frst know where they want to go (part of the task of planning) Plans thus furnish the standards of control New plans f | 7 Contoting: No undesirable |e ee SEE aon om . i \ fa @@ Figure 4.1 Close relationship of planning and controlling ‘TYPES OF PLANS Plans can be classified as (1) missions o purposes, (2) objectives or goals, (3) strategies, (4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets. Missions or Purpo: The mission, or purpo identifies the basic Funct part of it. Every kind of if it i to be meaningful enterprises have a basic f example, the purpose of ‘The purpose of a state F highways. The purpose 0 of a university is teachin, Google is well known as ff numerous factors, is ‘company that has set ir mmission is to organize t! simple and clear missio hojpful in directing empl ‘Adar and direct missio Although we do not « ness, for example, may 1 ‘an accomplish this by { products, The mission and to produce, refine, from diesel fuel to chemi as “better things throug. Kleenex trademark) regat of paper and paper pro. Aeronautics Space Adm ‘moon before the Russia enterprises, the purpose ‘many conglomerates hav accomplished through tt ~T Ofien the em ar ent ch goa ting. eo ‘Te concept of synergy can restr than the sim of the8 introduced to the five es controlling. In Part 2 of this duals working together ia s ‘ds the group's mission and people must know -Teis the most basic of all vctives and deciding on the urse of action from among proach to achieving prese. 5 managerial innovation, as cs the gap from where we ‘0 point that planning and 2f management (see Figure neaningless, since there is ng where they want to go rst know where they want ‘furnish the standards of | | | strategies, (4) polices, ‘Chapter 4 Essentials of Planning and Managing by Objectives 113 Missions or Purposes* ‘The mission, or purpose (the terms are often used interchangeably), identifies the basie function or tasks of an enterprise or agency or any par of it. Evéry kind of organized operition has, oF atleast should have Ff iris to be Meaningful, a mission or purpose. In every social system, enterprises have a basic function or task assigned to them by society. For cxample, the purpose of a business generally is the production and distribution of goods and services. ‘The purpose of a state highway department is designing, building, and operating a system of state highways. The purpose of the courts isthe interpretation of laws and their application. The purpose of a university is teaching, research, and providing services to the community Pers 8 _ INNOVATIVE PERSPECTIVE Google's Mission Google is well known as the world’s leading Intemet Search Engine. While its success is a function of numerous factors, its clear and focused mission has created an unambiguous direction for the company that has set in motion the steps to its global success. As listed on its website, “Google's mmission is to organize the world's information and make it universally accessible and useful? This simple and clear mission helps inform and contextualize all that Google does. The mission is also helpful in directing employee actions in dally dues, as each task should be in support ofits mission. ‘Aclear and direct mission inspires and directs and is a necessary condition for organizational success. Although we do not do so, some writers distinguish berween mission and purpose. While a busi- ress, for example, may have a social purpose of producing and distributing goods and services, it ‘an accomplish this by fulfilling a mission of producing certain lines of products. The mission of an oil company, like Exxon, is to search for oil and to produce, refine, and market petroleum and petroleum products, from diesel fuel to chemicals. The mission of Du Pont has been expressed 1s “better things through chemistry” and Kimberly-Clark (noted for its Kleenex trademark) regards its business mission as the production and sale ‘of paper and paper products. In the 1960s, the mission of the National Aeronautics Space Administration (NASA) was to get a person to the moon before the Russians. It is true that in some businesses and other enterprises, the purpose of mission often becomes fuzzy. For example, ‘many conglomerates have regarced their mission as synergy,"* which is accomplished through the combination of a-variety of companies. Oem the term wibis mentioned in connection wth the dcssion of minion. Poplar books on management dacs concepts such a goal setng tam manager, and orientation fowand the fue i connection with the cumin of ition. ‘The concept of synergy can be expesed simply aa sinuton in which 2 plus 2 becomes equal to 5, rin which the whole rover tha the sen ofthe pe.Policies define an area wit be consistent with, and contr problems, make it unnecessary | plans, ehus permitting manage Seeedinates do. —-——-—— “There are many types of engineers, encouraging emple conforming strictly to a high ¢ fixed, rather than cost-plus, p: jectives, or goals (the terms are used interchangeably in this book), are the ends toward which tivity is aimed. They represent not only the end point of planning, but also the end toward which organizing, staffing, leading, and. controlling are aimed. The nature of “objectives and management by objectives will be discussed in greater deal later in this chapter. wR Strategies For years, the military used the word snags to-mean grand plans made in ight of what ir was belicved an adversary might or might not do. Whie the term still usually has a competitive implication, managers increasing tse it to reflect broad areas of an enterprises operation. In this book, strategy is defined as the determination ofthe basic long-term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary jo achieve these goals. ’ Ford Motor Company has a | ‘of making low-cost, simple, « ‘gas-guzzling F-150 pickup tr never experienced before in small, think fuel efficiency, th Ford was fortunate; the became the basis for his ne\ South America and Bill Ford However, India's $2,500 ann fsa concem. Changing from the expectations of high oil more risky. ——$$— Policies Policies also are plans in that they are general statements or understand- ings that guide or channel thinking in decision-making, Not all policies are “statements”; they are often merely implied from the actions of managers ‘The president of a company, for example, may strictly follow—pethaps for convenience rather than as poliey—the practice of promoting from witha; the practice may then be interpreted as policy and carefully followed by subordinates. In fact, one of the problems of managers is to make suze that subordinates do not interpret as policy minor managerial decisions that are not intended to serve as patterns. Procedures Procedures are plans that est activites. They are chronolog {ides to action, rather than ‘et in which certain activities Western University outlines th t INNOVATIVE PERSPECTIVE | | | performance objectives, (2) ¢ | | | Google's Ten Points Google further explicates its core mission with “Ten things it knows to be true. These statements of truth help guide specific actions and, thus, serve as broad policies that help quide decisions and ‘behavior in the firm. Its first statement is: "Focus on the user and all else will follow.” This direct ‘and simple statement directs efforts toward enhancing the user experience first and then allowing J suczase in at objec fo ve ten rel prot Inf sie Its second statement reads “it's best to do one thing realy, really well” Again this philosophy for the fim also translates to other areas of firm management, from employee development to niche marketing. Focused statements Of policy or management that help guide employee actions translate to organizational performance ‘and profits. —————_—_—_—_———$—_—— performance discussion at th For example, in a manufactur department (for the original o and for customer ctedit appt production department (for t stock), and the shipping depa ‘A few examples illustrate t grant employees vacations; pr ing vacations to avoid disrupt them, maintaining records to applying for leave.‘chapter 4 Essentials of Planning ond Managing by Objectives 115 Policies define an area within which a decision is to be made and ensure that the decision will be consistent with, and contribute to, an objective. Policies help decide issues before they become “problems, make it unnecessary to analyze the same situation every time it comes up, and unify other | plans, thus permitting managers to delegate authority and still maintain control over what their sub- ordinates do. © There are many types of policies. Examples include policies of hicing only university-trained engineers, encouraging employee suggestions for improved cooperation, promoting from within, onforming strictly to a high standard of business ethics, seting competitive prices, an insisting on fed, rather than cost-pls, pricing vol), are the ends toward which + but also the end toward which Jing are aimed. The nature of will be discussed in greater deta ‘pie to mean grand plans made ¥y might or might noc da, While Dlication, managers increasing) wise operation, In this book, the basic long-term objectives Ses of action and allocation of & I Ford’s Global Policy De: f “Ford Motor Company has a long tradition (dating back to the Model) of being guided by a policy ‘of making low-cost, simple, affordable cars. Up to 2007/8, Ford was known fo its very successful “gas-guzzling F150 pickup truck. After that came the oil crisis that escalated gas prices to a level “never experienced before in America, Bill Ford had to make an important policy decision: Think ‘smal, think fuel efficiency, think global. Ford was fortunate; the company had successful fuel-efficient European models which “became the basis for his new policy of downsizing the cars. The company was also successful in "South America and Bill Ford thinks that growth opportunites are in Asia such as India and China. However, Inaia's $2,500 announced car and other competitors’ intentions of building low-cost cars eral statements of understand- fon-making, Not all policies are from the actions of managers ‘ay strictly follow—perhaps for is a concem. Changing from a very profitable pickup policy to a small is beautiful is risky. But, wth ice of promoting from within; | * the expectations of high oll and gasoline prices to continue, a “do-nothing” strategy would be even licy and carefully followed by more risky. of managers is to make sure ” ‘managerial decisions | Procedures Procedures are plans that establish a required method of handling furare activites. They ate chronological sequences of required actions. They are suides to action, rather than to thinking, and they detail the exact man- net in which certain activities must be accomplished. For example, Case ‘Western University outlines three steps for its appraisal process: (1) setting performance objectives, (2) performing a mid-year review of the objectives, and (3) conducting performance discussion at the end of the period.* Procedures often cut across departmental lines. For example, in a manufacturing company, the procedure for handling orders may involve the sales department (For the original ordet), the finance department (for acknowledgment of receipt of funds ‘and for customer credit approval) the accounting department (for recording the transaction), the department (for the order to produce the goods or the authority to release them from ——— bo true.” These statements Jat help guide decisions and else will flow.” This direct ‘ence first and then allowing ts second statement reads + eres ey (Saracen Cater Be Pea i suprngdepreen or xtcminaon of shipping este nd 0) organizational performance ‘A few examples illustrate the relationship between procedures and policies. Company policy may ‘grant employees vacations; procedures established to implement this policy will provide for schedul- — ing vacations to avoid disruption of work, setting rates of vacation pay and methods for calculating them, maintaining records to ensure each employee of a vacation, and spelling out the means for applying for leave.is often called a profit plan. At units of product, or machine- operation, as the expense budge does; or it may show cash flow 1s spell out specific required actions or nonactions, allowing no discretion. They are usually the | simplest ype of plan. “No smoking” isa rue that allows no deviation from Seo ee Nace he sel ofa Tice of arc etna Pree Or ah be suspended from bidding agree to a list of rules and epariment, costs from one contract to "cards. The supervisor has vas to make the correction, intty must not be erased so tablish tight rules for charg- even a pen or a calendar Tier and are examples not detween the two functions —$_—_ cedures, rules ask as oloyed, and other elements 1m; they are ordinarily sup. sidin's program to acquire ram to improve the starus ‘t they may be as minor as ‘0 improve the morale of 2at of a farm machinery ‘essed in numerical terms. financial operating budget } | | Chapter 4 Essentials of Planning and Managing by Objectives 117 is often called a profit plan. A budget may be expressed in financial terms; in terms of labor-hovrs, its of product, or machine-hours; or in any other numerically measurable terms, Tt may deal with ‘operation, as the expense budget does; it may reflec capital outlays, as the capital expenditure budget does; ot may show cash flow, as the cash budget does. One of the most comprehensive budgets is prepared by the Office of Management and Budget of the White House.’ The budget proposal isthen presented to the Congress by the President of the United States, Since bulges are also control devices, we reserve our principal discussion of them for Chapter 19 ‘on control techniques. However, making a budget is clearly planning. The budgets the fundamental planning instrument in many companies. It forces a company to make in advance—whether for a ‘week ot for five years—a numerical compilation of expected cash flow, expenses and revenues, capital ‘athys, o labor- or machine-hour utilization. The budget is necessary for control, but it cannot serve asa sensible standard of control unless it reflects plans STEPS IN PLANNING “The practical steps listed below, and diagramed in Figure 4.2, are of general application. In practice, however, one must study the feasibility of possible courses of action at each stage. Comparing alternatives in ih ot goats ‘Which altemative will give us the | ‘best chance of meeting our goals at "th oweat cont andhighest prot? © Figure 4.2 Stepsin planingort2 Plnning . Being Aware of Opportunities ‘Although it precedes actual planning and is therefore not stity a part of the planning process, a | awareness of opportunities in the extemal environment as well as within the organization isthe real starting point for planning. All managers sho portunities and see them clay and completly, know where their company stands in light of i, Ftrengghs and weaknesses, understand what problems it has to solve and why, and know what it can_ Cxpect to gain. Seting realistic objectives depends on ths awareness. Planning requires a realise) diagnosis of the opportunity situation. } 2. Establist ‘The second step in planning is to establish objectives for the entire enterprise and then for each) subordinate work unit. This is to be done for the long term as well as forthe short range. Objective specify the expected results and indicate the end points of what is to be done, where the primary cmphasis is to be placed, and what is to be accomplished by the network of strategies, polices procedures, rules, budgets, and programs. Enterprise objectives give direction to the major plans, which, by reflecting these objectives, define the objective of every major department. Major departmental objectives in turn contol the objective: of subordinate departments, and so on down the line. In other words, objectives form a hierarchy “The objectives of lesser departments will be more accurate if subdivision managers understand the overall enterptise objectives and the derivative goals. Managers should also have the opportunity ‘contribute ideas for seting their own goals and those of the enterprise, } 3. Developing Premises “The next logical step in planning is to establish, circulate, and obtia agreement to ilze critical planning premises such as forecast, applicable basic policies, and existing company plans. Premises are assumption: about the environment in which the plan is to be cartied out. ti ‘important for all the managers involved in the planning process to age: ‘on the premises. Infact, the major prineiple of planning premises is tix ‘more thoroughly individuals charged with planning understand and age: to utilize consistent planning premises, the more coordinated enterprise planning willbe Forecasting is important in premising: What kinds of markets will the bbe? What volume of sales? What prices? What products? What technic developments? What costs? What wage rates? What tax rates and police? ‘Whar new plants? What policies with respect to dividends? What polit or social environment? How will expansion be financed? What are de long-term trends? 1g Objectives | “Fike word problems might be used instead of opportunities. However, sae of dsonder or confsion and a need fra sous to acheve a given goal an more constroctvely be regarded as an opportnity In president does not eemat hs colleagues to speak of problems hey mas speak only of opportuni 4. Determining Alten ‘The fourth step in planning those not immediately appa take a preliminary Took at possible farure-op->- exist, and quite often an.alis ‘The mote common prob so that the most promising + there is a limit to the numb tsually make a preliminary « 5. Evaluating Altern After seeking out alternative evaluate the alternatives by to be the most profitable bt look less profitable but may objectives ‘There are so many alter be considered that evaluatic methodologies and applicat Evaluating A \ India is well known for its a with the introduction of TA” ‘Many car companies have “in 2008. GM will compete ‘expensive than the advert in Europe, entered the pre focusing on fuel efficiency very successful with its P carmaker BMW plans to it ‘and experimenting with it |, However, nda tong hybrid vehicles would hav ia has introduced alread makers wonder what alter ofthe increasing number 6. Selecting a Cours This is the poine at which fac, one very succesful and stu compa analysis and evaluation of manager may decide to fo! =Chapter 4 Essentiats of Planning and Managing by Objectives 119 “4. Determining Alternative Courses ‘tt of the planning process, | The fourth step in planning is to search for and examine alternative courses of action, especially within the organization ig ihe [those not immediately apparent. There is seldom a plan for which reasonable alternatives do not ‘ty look at possible future op: feist, and quite often an alternative that is not obvious proves to be the best. Company stands in light of is | The more common problem is not finding alternatives but reducing the number of alternatives cad why, and know what it can | that the most promising may be analyzed. Ewen with mathematical techniques and the computer, Planning requires a realic {there is limit to’the number of alternatives that can be thoroughly examined. The planner must ually make a préliminary examination to’ discover the miost fruitful possibilities. 5. Evaluating Alternative Courses enterprise and then for each | Aft seeking out alternative courses and examining their strong and weak points, the next stp isto oc the short range. Objectives | evliate the alternatives by weighing them in light of premises and goals, One-course may appear be done, where the primary | ‘be the most profitable but may requie a large cash outay and havea slow payback; another may twork of strategies poicer | 0k ss profitable but may involve less rs; still another may better suit che company’s long-range cbjectves. ting these objectives, d ‘There are so many alternative courses in most situations and so many variables and limitations to or ine | considered that evaluation can be exceedingly difficult. Because of these completes the newer in turn control the objec objectives form hceaey | etodolgies and aplxtion and analysis are discussed in Pat 6 on controling on managers understand the SIS cat |e ce err Evaluating Alternative Courses for the Indian Automakers to igate the Environmental impact® me ciate, and obtain. | nga is wo known forts mooroyes. Hindustan Motor is known forts traconal Ambassador, But inch. forecasts, pptiele | yh the eduction of TATA 82.00 Nano, Idan aut industry got in the iteratona meh. ites are assumptions | Many car companies have entered Inda. For example, General Motors bul is second plant in India 5 to be carried ut iy | 2008. GM wll compete with Maru, Nano, and other. However, the car fs expected to bo more planning process to agree | expensive than the advertised $2,500 Nano by TATA Motors. Volkswagen, the biggest car company rem, ie | in Burope, entered the pre-owned auto markt in india, With the high gasoline prices, companies ding unde penises is the sng on fel efficiency and at he seme time developing eco-tiendly engines. Toyota hes boon ste coon an 38° | very successful wth ts Prus hybrid car. Honda is moving In the same drecton and even kuxury verprise | (Sraker BMW plans to indice later a hybrid vehicle, TATA Motors working onan elctrc car ard experimenting wth hum ion batteries ‘inds of markets will tere | __ However, ncla’s long-term goal is to develop hydrogen fueled automobiles. But at the outset, Products? What technical hybrid vehicles would have to be imported which could run into barriers. Stil, Honda Si! Cars in- ‘hat tax rates and policies? | _ ia has introduced already its very popular Civic model with hybrid propulsion, Government policy dividends? What politcal _|___™akers wonder what alterative courses should be pursued to minimize the environmental impact financed? What we she) tthe creasing number of cars ~~ —_—_$<_$—_ <_< 6. Selecting a Course ‘fasion ta need for a alason This i the point at which the plan js adopted—the real point of decision-making, Occasionally, an Y acces and ase company | analysis and evaluation of alternative courses will disclose that two or more are advisable, and the ‘manager may decide to follow several courses rather than the one best course. —20 port2 Planning . Formulating Derivative Plans | Opsectives Objectives were defined ear activites are directed. Sine fe -aualcand objectives, these ae [context of the discussion, long-term or short-term, b 7 when a decision is made, planning is sekdom complete, and a seventh step is indicated, Derivative | plans ae almost invariably required to support the basic pln 8. Quantifying Plans by Budgeting After decisions are made and plans are set, the final step in giving them meaning, as was indicated in | objectives, which means at the discussion on types of plans, is to quantify them by converting them into budgets The overall | determine whether or not budget of an enterprise represents the sum total of income and expenses, with resultant profit or | every manager is to create ¢ sup ad the badges of maior ance set items sch cand apa expenrrn Fach | pro) land veal department of program of a business or some other enterprise can have its own budgets, usually of | as well as the effectiveness expenses and capital expenditures, which tie into the overall budget. Tf done well, budgets become a means of adding the various plans and set important standards |The Nature of Obje: aginst which planning progress can be measured | Objectives state end result objectives form a hierarchy ‘goals that are sometimes ir ‘group, and even within inc term performance, and pet Writing a Business Plan for a New Venture Eneproneurs typically begin the planning process by writing a business plan fr their new venture, | Hierarchy of Objectives in their business plan, entrepreneurs attempt to clearly describe the purpose oftheir business (what | As Figure 4.3 shows, objec itis the business actualy docs), and they then kdentiy the market opportuniy or markot problem | oo ccuves The senith of they wish to solve. They describe how their product relates to the market opportunity and how they | /ecwch Tis Zeno! & intend to sell thei product, and how to finance the running of their new business, This business ere is the social purpose planning process is essenlal o help dec the efforts ofthe entrepreneur. The business planis also | siccs at a reasonable pri ‘essential to present to potential investors in the new business to gain their confidence and backing. | be to furnish convenient, lr ‘A complete business plan outline is presented in the closing of part 2 of this text that can be used | be to produce, market, and 28 a reference for entrepreneurial managers and students. id dso fa bom, ib met differentiate beter in urn translated into gene eee ‘ ; producing, and matketing 1 Coordination of Short- and Long-Range Plans ‘Theneielewal afte Lb as those in the key result a is essential for the success Although there is no cor tod they may differ betwee innovation, productivity, p more remote objectives Responsible managers should continually review and revise immediate decisions to determine development, worker perfe two other key result areas 1 ‘whether they contribute to long-range programs, and subordinate managers should be regulary briefed on long-range plans so that they will make decisions consistent with the company’s long-range goals Examples of objectives Doing tis is fr easier than to correct inconsistencies ater, expecially since short-term commitmens | #¥extment by the end of « tend to lead to farther commitments along the same line. uct X produced by 7 perce level (productivity), Often short-range plans are made without reference to long-range plans. This is plainly a serious | error, The importance of integrating the two types can hardly be overemphasized, and no short run plan should be made unless it contributes to the achievement of the relevant long-range plan. ‘Much waste arises from decisions about immediate situations that fail to consider their effect on |_ his ideas on scientific management (apTeR 2 THE EVOLUTION OF MANAGEMENT THOUGHT AND THE PATTERNS OF NANAGHIENT ANALYSIS 2 5 Di the rete a0 lative crud of managemen:cheory and sc lence, the development of thought on management dates back to the days when people first attempted to accomplish goals by working together in groups Although modern operational-management theory dates primarily from the ‘early twentieth century, there was serious thinking and theorizing about manag- ing many years before. While this chapter can do little more than sketch some of the high spots in the emergence of management thought,! itis worthwhile for persons interested in management to know something of the background of the evolution of management thought. Even limited knowledge can help one appreciate the many insights, ideas, and scientific underpinnings which preceded the upsurge of management writing during recent years. Familiarity with the history of management thought may help you avoid rediscovering previously known ideas. You will see that the many different contributions of writers and practi- tioners have resulted in different approaches to management, resulting in a kind of management theory jungle. Later in this chapter you will learn about the different patterns of management analysis and what can be done to untangle the jungle. But let us first focus on the emergence of management thought summa- rized in Table 2-1. While it would be too complex and voluminous to include in such a table all the persons who have made significant contributions in the evolution of management thought, major contributors are noted. FREDERICK TAYLOR AND SCIENTIFIC MANAGEMENT Frederick Winslow Taylor gave wp/foing 14 college and started gas an apprentice patternmaker and machinist in 1875, joined the Midvale feos in Philadelphia as a machinist in 1878, and rose to the position of chief efgineer after earning a degree in enginedring through evening study. He inténted high- speed stecl-cutting tools and spent most of his life as a consulting engineer. ‘Taylor is generally acknowledged as “the father of scientific management.” Probably no other person has had a greater impact on the early development of management. His experiences as an apprentice,4 common laborer, a foreman, a master mechanic, and then the chief enginéér of a steel company gave Taylor ample opportunity to know at first hand the problems and attitudes of workers and to see the great opportunities for improving the quality of management. ‘Taylor's patents for high-speed steel-cutting tools and other inventions, as well as his early engineering consulting work, made him so eell off that he retired fron : ind spent the remaining Y4 years of his life as an unpaid consultantand lecturer to promote Taylor's Major Concern Taylor's major concern throughout most of his life was that of, increasing efficiency in production, not only to lower costs and raise profits but also to make possible increased pay for workers through their higher productivity As aABLE 2-1 _The Emergence of Monagement Thought Nome and year (approx) Major contribution to management Scientific monogement Frederick W. Toylor ‘Acknowledged os "the father of scene management.” His priory concer wos © “Shop Management (1903) Ierease prodctvity Trough grecterefienc in production en Pereoued pay for Procils of Scie srerkers hvough the epplicaton ofthe see method. His principles enphosied sng ‘Monagement (1911) “cence, creating group harmony and cooperation, ccheving maximum ouput, ond Testimony before the Special developing workers. Howse Committee (1912) Henry L. Gant (1901) Called for scientific selection of workers and “harmonious cooperation” between labor ‘and management. Developed the Gantt chart (Chapter 21). Stressed the need for troiing Frank ond tition Gite Frank is known primorily for his time ord motion studs. Lilian, an industria (1900) piychologit, focused on the human aspects of work and the understanding of workers’ personales ond needs. ‘Medern operational-management theory Hone Fayal Referred to a8 “the father of medecn management theory.” Divided industriel ocvites ‘Adinistrotion Industrielle into ix groups technical, commercial, financial, security, occounting, and managerial. ‘of Générale (1916) Recognized the need for teaching management. Formuleted fourteen principles of ‘management, sch os authority ond responsibility, unity of command, scalar choi, ond esprit de corps. Behavioral sciences Huge Minsterberg (1912) Application of psychology te industry and management. Walter ill Scott (1911) Application of psychology fo odversing, marketing, ond personel Max Weber (ronslations ‘Theory of bureaucracy. 1946, 1947) Vilredo Poreto (books Relerred to as “the father ofthe sociol systems approcch’ 10 oxgonization ond 1896-1917) ‘management Elton Moyo ond FJ. Famous shdies at the Hawhorne plant of the Western Electric Company. inflvence of Roethlaberger (1933) 1ocoloftitudes ond relationships of work groups on performance, Systems theory Chester Bornord The fork of managers is to maintain a systom of cooperative effort in a formal The Functions of the ‘organization. He suggested 0 comprehensive social systems approach to managing. Executive (1908) Emergence of modern management thought and recent contributors fo management Many authors are discussed in the book. Major conriouiors include Chris Argyris, Robert R. Bloke, C. West Churchman, Ermest Dale, Keith Davis, Peter Drocker, Mary Porker Follet, Frederick Herzberg, G. C. Homans, Harold Koontz, Rens Ukert, Douglas McGregor, Abrohom H. Maslow, Lyman W. Porter, George A. Steiner, Lyndall Urwck, Norbert Wiener, ‘ond Joon Woodward. Lourence Peter (1969) ‘Observed that eventually people get promoted to o level where they ore incompetent, liom Ouchi (1981) Discused selected Japanese monagerial practices adapted inthe U.S. envionment. ‘Thomas Paters ond Identified characteristics of companies they considered excellent. Robert Weterman (1982) “Sore: Some nlomation ths bleu boned on Claude §, George, Ir The Hit of Managemen! Thooght (Englewood Gifs, Nl Preticsal 1972). —oral # in, ond ce of siman, + Rensis ‘wiener, peter. (CUPTER2 THE EVOLUTION OF MANAGEMENT THOUGHT AND THE PATTERNS OF MANAGEMENT ANALYSIS _9°7 FREDERICK W. TAYLOR 1856-1912 Hitorel Pies Sevin, Chee young man working in machine shops, he was impressed with the degree of “soldiering” on the job, of making work, and of producing less rather than more, due primarily to the workers’ fear that they might work themselves out of a job if they produced more. He saw “soldierin From his own experience, he knew that much higher productivity was possible without unreasonable effort ‘on the part of the workers, Taylor decided that the problem of productivity was a matter of ignorance on the part of both management and labor. Part of this ignorance arose from the fact that neither managers nor workers knew what constituted a “fair day's work” and a “fair day's pay.” Moreover, he believed that both managers and workers were concerned too much with how they should divide the surplus that arose from productivity—the split in thinking between pay and profits—and not enough with increasing the surplus so that both owners and laborers could get more compensation. In brief, Taylor saw productivity as the answer to both higher wages and higher profits. He believed that the application of scientific methods, instead of custom and rule of thumb, could yield productivity without the expenditure of more human energy or effort. Teylor's Principles fe Taylor’s famotis work entitled The Principles of Scientific Management was pub- lished in 1911. But one of the best expositions of his philosophy of management. is found in his testimony before a committee of the House of Representatives, where he was forced to defend his ideas before a group of congressmen, most of whom were hostile because they believed, along with labor leaders, that Taylor's ideas would lead to overworking and displacing workers.? ‘The fundamental principles that Taylor: saw underlying ithe. scientific approach to management are summarized in the Perspective on the next page You will notice that these basic precepts of Taylor's are not far from the fundamental beliefs of the modern manager. It is true that some of the tech- niques Taylor and his colleagues and followers developed in order to put his philosophy and principles into practice had certain mechanistic aspects. Tohs 5. Developing all workers to the fullest extent po: se or tro company's highest prosperity determine what a fair day’s work was and to help in finding the one best way of doing any given job, the careful study of time and motion was widely applied. Likewise, various pay plans based on output were used in an attempt to increase the “surplus” (as Taylor referred to “productivity"), to make sure that workers, who produced were paid according to their productivity, and to give workers an incentive for performance. As can be seen, techniques such as these were necessary to make “Taylor's philosophy work, based as it was on improving productivity, on giving people their best opportunity to be productive, and on, rewarding workers for individual productivity. It is likewise true that these techniques could be used, as they often were by many factory owners over the world, to increase labor productivity without providing ample reward, adequate training, or managerial help. But this was certainly not what Frederick Taylor had in mind. On the contrary, throughout Taylor's written work, even though it does seem to be unduly preoccupied with productivity at the shop level, runs a strongly humanistic theme. He believed that people should be carefully selected and trained and that they should be given the work they could do best. He had perhaps an idealis’s notion that the interests of workers, managers, and owners, could and should be harmonized. ‘of careful advanced planning by managers and the responsibilty of managers to design work systems s0 that workers would be helped to do their best. But, as he spoke of management, he never overlooked the fact that “the relations between employers and men form without question the most important part of this art." LLOWERS OF TAYLOR Among the immediate disciples of Taylor were such outstanding pioneers as Henry L. Gantt and Frank and Lillian Gilbreth, 9 mention only a few. Henry L. Gantt Gant—like Taylor, a mechanical engineer—joined Taylor at the Midvale Steel Company in 1887. He stayed with Taylor in his various assignments until 1901,ees In undertaking his work, Frank Gilbreth was greatly aided and supported by his wife, Lillian. She was one of the earliest industrial psychologists and received her doctor's degree in this field in 1915, 9 years after her marriage and during the period when she was involved in having and raising her celebrated dozen children (later made famous by the book and movie Cheaper by the Dozen). ‘After her husband's untimely death in 1924, she carried on his consulting business and was widely acclaimed as the “first lady of management” throughout her long life, which ended in 1972 when she was 93. Lillian Gilbreth’s interest in the human aspects of work and her husband!’s interest in efficiency—the search for the one best way of doing a given task—led to a rare combination of talents.* It is therefore not surprising that Frank Gilbreth long emphasized that in applying scientific-management principles, we must look at workers first and understand their personalities and needs. It is interesting, too, that the Gilbreths came to the conclusion that it is not the monotony of work that causes so much worker dissatisfaction, but rather man- agement’s lack of interest in workers. ‘There were, of course, many other management pioneers who built some of their thinking and practice on the ideas and findings of Frederick Taylor. But the three mentioned here will give you some idea of Taylor's influence and the nature of the thinking developed by his disciples. GAYOL: FATHER OF MODERN YOPERATIONAL-MANAGEMENT THEORY Perhaps the real father of modern management theory is the French indus- trialist Henri Fayol. Although there is little evidence that management scholars, either in England or in the United States, paid much heed to Fayol’s work or knew much about it until the 1920s or even years later, his acute observations on the principles of generalmanagement first appeared in 1916 in Freiich, under the title Administration Industrielle et Générale. This monograph, reprinted in French several times, was not translated into English until 1929; even then, it was printed by the International Institute of Management at Geneva, and only a few copies were made available for sale outside Great Britain. No English translation was published in the United States until 1949, although the work of Fayol was brought to the attention of American management scholars in 1923 by Sarah Greer’s translation of one of Fayol’s papers, later incorporated in a collection of papers by Gulick and Urwick.* In this same collection, the more general aspects of Fayol's work were referred to in a paper by the British management consul- tant and scholar Lyndall Urwick.® Industrial Activities Fayol found that activites of an industrial undertaking could be divided into Six groups, as shown in Figure 2-1: (1) technical (production), (2) commercial (buying, selling, and exchange), (3) financial (search for, and optimum use of, capital), (4) security (protection of property and persons), (5) accounting (includsupported logists and arriage and celebrated y the Dozen), consulting throughout that Frank inciples, we reeds. It is tis not the sather man- vuilt some of Taylor. But ince and the envh indus- ent scholars, cl's work oF ceryations on ‘ch, under: reprinted in a then, it was xd only a few translation of Fayol was 198 by Sarah collection of neral aspects ment consul- vided into Six } commercial mum use of, ating (includ [CHAPTER 2TH EVOLUTION OF MANAGEMENT THOUGHT AND THE PATTERNS OF MANAGEMENT ANALYSIS 3 7 FIGURE 2-1 Financ! Ssecurty (wanacenss \ ‘ACTS. @\_S/% OF secosteg Technical Manager Planing ation Sormang Coordinon 2 Conta! FAYOL'S ACTIVITIES IN INDUSTRIAL UNDERTAKING. ing statistics), and (6) managerial (planning, organization, command, coordina- tion, and control). Pointing out that these activities exist in businesses of every size, Fayol observed that the first five were well known, and consequently he devoted rifost of his book to an analysis of the sixth. General Principles of Management Noting that principles of management are flexible, not absolute, and must be usable regardless of changing and special conditions, Fayol listed fourteen, based on his experience. They are summarized in the Perspective, PERSPECTIVE: FAYOL'S PRINCIPLES 1. Division of work. This is the specialization which economists consider necessary to efficiency in the use of labor. Fayol applies the principle to all | kinds of work, managerial as well as technical. 2. Authority and responsibility. Hiere Fayol finds authority and responsibility | to be related, with the latter the corollary of the former and arising from it. He | secs authority as a combination of official, deriving from the manager's posi- | tion, and personal, “compounded of intelligence, experience, moral worth, | past service, etc.,” factors, 3. Discipline. Seeing discipline as “respect for agreements which are rected at achieving obedience, application, energy, and the outward matks of respect,” Fayol declares that discipline requires good superiors at all levelsfrom one superior only. || 5. Unity of direction. According to this principle, each group of activities jp-rith-the same objective must have one head and one plan. As distinguished j 4. Unity of command. This means that employees should receive orders from the fourth principle, it relates to the orgaiiization of the “body corporate,” rather than to personnel. (Fayol did not in any sense mean that all decisions should be made at the top.) 6. Subordination of individual to general interest. ‘This is self-explanatory; when the two are found to differ, management must reconcile them. 7. Remuneration. Remuneration and methods of payment should be fair and afford the maximum possible satisfaction to employees and employer. 8. Centralization, Without using the term “centralization of authority,” | Fayol refers to the extent to which authority is concentrated or dispersed. "Individual circumstances will determine the degree that will “give the best over- "all yield.” | 9 Sealar chain. Fayol thinks of this as a “chain of superiors” from the | highest to the lowest ranks, which, while not to be departed from needlessly, should be short-circuited when to follow it scrupulously would be detrimental. | 10. Order. Breaking this into “material” and “social” order, Fayol follows the simple adage of “a place for everything [everyone], and everything [everyone] _ in its [his or her] place.” This is essentially a principle of organization in the arrangement of things and people. 11. Equity. Loyalty and devotion should be elicited from personnel by a combination of kindliness and justice on the part of managers when dealing | with subordinates, | 12, Stabitity of tenure. Finding unnecessary turnover to be both the cause and the effect of bad management, Fayol points out its dangers and costs. 1B. Initiative, Initiative is conceived of as the thinking out and execution of a plan. Since it is one of the “keenest satisfactions for an intelligent man to experience,” Fayol exhorts managers to “sacrifice personal vanity” in order to it subordinates to exercise it 1. Esprit de corps. This is the principle that “in union there is strength," as well as an extension of the principle of unity of command, emphasizing the need for teamwork and the importance of communication in obtaining it In concluding his discussion of these principles, Fayol observed that he had made no attempt to be exhaustive but had tried only to describe those he had had the most occasion to use, since some kind of codification of principles appeared to be indispensable in every undertaking