MANAGEMENT TOOLS

AND TECHNIQUES
LECTURE – 3
 System Approach of Management
A system consists of interrelated and
interdependent subsystems working as a
whole.
“A system is an organized, unitary whole
composed of two or more interdependent
parts, components, or subsystems and
delineated by identifiable boundaries from its
environmental supra-system.” – Kast and
Rosenzweig.
Therefore, system is a grouping of parts that act
as an entity rather than as a conglomeration of
individual parts.
An organization is a system with parts
such as employees, assets, products,
resources, and information that form a
complex system.
Systems can be open or closed. A closed
system is not affected by its environment..
An open system is a system that is
affected by its environment.
Most theorists treat an organization as an
open system.
Open Systems : Characteristics
Synergy – the ability of the whole equals to
more than the sum of its parts.
Input-Throughput-Output : An open system
converts the inputs into some kind of
outputs. This process is known as
throughput or transformation process. A
business organization may convert inputs
like materials, energy, information into goods
and services through the transformation
process.
Systems as cycles of events. – Is a cyclical
process.
 Characteristics of Open Systems

Negative entropy –Entropy refers to the

tendency of systems to decay over time. Entropy is the law
of nature which suggests that all organized forms move
towards disorganization and demise. In order to survive,
open systems must move to arrest the entropic process;
they must acquire negative entropy. This is possible by
importing more energy from the environment than what a
system spends. For example, a business organization must
earn profit in order to survive on long-term basis.
Feedback Mechanism: An open system has feedback
mechanism through which it imports information from
the environment. The simplest type of information input
is in the form of negative feedback. Information
feedback of negative type enables the system to correct
its deviations from the desired course of actions.
Steady state - the tendency toward a relatively
stable equilibrium between interdependent elements.
The importation of energy from the environment to
maintain negative entropy has some constancy in
energy exchange so that the system has steady
state. However, this steady state is not motionless or
a true equilibrium. Since energy import and export is
a continuous process, a new equilibrium may be
formed.
Differentiation- An open system moves in the
direction of differentiation and elaboration. Old
patterns are changed by new specialized functions.
Organizations, like other open systems, move
towards well-differentiation and specialization of
roles and functions. As the conditions permit,
organizations bring more specialists and create
specialized departments to have better control over
the environment.
Integration and Coordination: As
differentiation progresses, the system must provide
some mechanisms for integrating and coordinating
various parts. In the case of an organization, this is
done through devising various processes and
procedures.
Equifinality: An open system is
characterized by the principle of equifinality
which suggests that a system can reach the
same final state from differing initial
conditions and by a variety of paths. It
implies that not all organizations may choose
the same course of actions and strategies to
be successful.
Implications of Systems Theory
Systems approach says that any
change in any subsystem will cause
change in all other subsystems and the
whole system.
So, subsystems are interrelated and
interdependent.
Implications of Systems Theory
It provides a framework for assessing
how well the various parts of an
organization interact to achieve a
common purpose.

It makes managers to understand the

management of an organization in its
totality – a macro view.
 Organic and Mechanistic
Approach in Management
An organic organization is one that is
very flexible and is able to adapt well to
changes. Its structure is identified as
having little job specialization, few
layers of management, decentralized
decision-making, and not much direct
supervision.
The organic, flexible system is more
appropriate in firms with either
small-batch or continuous process
production systems.
Mechanistic approach is hierarchical,
bureaucratic, organizational-structure
characterized by (1) centralization of
authority, (2) formalization of procedures
and practices, and (3) specialization of
functions. Mechanistic organization are
comparatively simpler and easy to
organize, but find it difficult to cope with
rapid change.
Mechanistic, classical system is
appropriate where mass production
technology is utilized.
 Contingency Theory of
Management
Jay W. Lorsch and Paul R.
Lawrence(1970) mentioned that the
appropriate internal states and
processes of the organization is
contingent upon external requirements
and member needs.
This view leads to a new approach of
management, that is Contingency
/Situational Approach.
 Contingency management
Contingency theory of management is
a viewpoint that argues that
appropriate managerial action depends
on the particular parameters of the
situation.
We know that no two situations are not
exactly alike. So, same management
action will not equally applicable in two
situations with equal success.
 Contingency Theory of
Management
So, there is no one best way to manage.
One has to identify the circumstances or
contingencies to know which approach will
be effective in a given situation.
Thus, managers have to analyze the
situation, and apply managemnt
techniques that best fit with the
situation.
This is the idea of contingency theory of
management.
 Z Management (1981)
During the 1980s, American business and
industry experienced a tsunami of demand for
Japanese products and imports, particularly in
the automotive industry.
Why were U.S. consumers clambering for cars,
televisions, stereos, and electronics from Japan?
Two reasons: (1) high-quality products and (2)
low prices.
The Japanese had discovered something that
was giving them the competitive edge.
The secret to their success was not what they
were producing but how they were managing
their people—Japanese employees were
engaged, empowered, and highly productive.
Management professor William Ouchi argued
that Western organizations could learn from their
Japanese counterparts.
Although born and educated in America, Ouchi
was of Japanese descent and spent a lot of time
in Japan studying the country’s approach to
workplace teamwork and participative
management.
The result was Theory Z—that blended the best
of Eastern and Western management practices.
The benefits of Theory Z, would be reduced
employee turnover, increased commitment,
improved morale and job satisfaction, and
drastic increases in productivity.
Theory Z : William Ouchi (1978)
Type-A
Management Type –J
Type –Z
Management Management
-Short term
employ- -Life time employment
-Long term employment
ment. --Consensual decision
-Consensual decision
-Individual decision making.
making.
making. -Collective responsibility
-Individual responsibility.
-Individual respon- -Slow evaluation and
-Slow evaluation and
sibility. promotion.
promotion.
-Rapid evaluation -Implicit informal control
-Implicit, informal control
and promotion. -Nonspecialised
With explicit formalised
-Explicit formalised career path.
measures.
control. -Holistic concern for
-Moderately specialised
-Specialised career employees.
career path.
path.
-Holistic concern for
-Segmented
employees including
concern
family.
for employees.
Theory Z stresses the need to help workers become
generalists, rather than specialists.
It views job rotations and continual training as a means
of increasing employees’ knowledge of the company and
its processes while building a variety of skills and
abilities.
Since workers are given much more time to receive
training, rotate through jobs, and master the intricacies of
the company’s operations, promotions tend to be slower.
The rationale for the drawn-out time frame is that it helps
develop a more dedicated, loyal, and permanent
workforce, which benefits the company; the employees,
meanwhile, have the opportunity to fully develop their
careers at one company.
When employees rise to a higher level of management, it
is expected that they will use Theory Z to “bring up,”
train, and develop other employees in a similar fashion.
Ouchi’s Theory Z makes certain assumptions about
workers.
They seek to build cooperative and intimate working
relationships with their coworkers. In other words,
employees have a strong desire for affiliation.
Workers expect reciprocity and support from the
company. People want to maintain a work-life balance,
and they value a working environment in which things
like family, culture, and traditions are considered to be
just as important as the work itself. Under Theory Z
management, not only do workers have a sense of
cohesion with their fellow workers, they also develop a
sense of order, discipline, and a moral obligation to work
hard.
Finally, it assumes that given the right management
support, workers can be trusted to do their jobs to their
utmost ability and look after for their own and others’
well-being.
 Organizational culture for Z management
A strong company philosophy and culture: The company
philosophy and culture need to be understood and
embodied by all employees, and employees need to
believe in the work they’re doing.
Long-term staff development and employment: The
organization and management team need to have
measures and programs in place to develop employees.
Employment is usually long-term, and promotion is
steady and measured. This leads to loyalty from team
members.
Consensus in decisions: Employees are encouraged and
expected to take part in organizational decisions.
Generalist employees: Because employees have a
greater responsibility in making decisions and
understand all aspects of the organization, they ought to
be generalists. However, employees are still expected to
have specialized career responsibilities.
Concern for the happiness and well-being of workers:
The organization shows sincere concern for the health
and happiness of its employees and their families. It
takes measures and creates programs to help foster this
happiness and well-being.
Informal control with formalized measures: Employees
are empowered to perform tasks the way they see fit,
and management is quite hands-off. However, there
should be formalized measures in place to assess work
quality and performance.
 Individual responsibility: The organization recognizes the
individual contributions but always within the context of
the team as a whole.

Theory Z is not the last word on management, however, as

it does have its limitations. It can be difficult for
organizations and employees to make life-time
employment commitments. Also, participative
decision-making may not always be feasible or
successful due to the nature of the work or the
willingness of the workers. Slow promotions, group
decision-making, and life-time employment may not be a
good fit with companies operating in cultural, social, and
economic environments where those work practices are
not the norm.
 McKinsey’s 7s Approach of
Management
Developed in the early 1980s by Tom
Peters and Robert Waterman, two
consultants working at the McKinsey &
Company consulting firm, the basic
premise of the model is that there are
seven internal aspects of an
organization that need to be aligned if it is
to be successful.
The 7s model of management is
extensively used in many organizations
 McKinsey’s 7s Approach of
management

Systems
Structu
Style
re

Strate Management
gy Staff

Skills Shared
Values
The McKinsey 7-S model involves seven interdependent
factors which are categorized as either "hard" or "soft"
elements:
Hard Elements: Strategy, Structure and Systems
Soft Elements: Shared Values, Skills, Style, Staff.
"Hard" elements are easier to define or identify and
management can directly influence them: These are
strategy statements; organization charts and reporting
lines; and formal processes and IT systems.
"Soft" elements, on the other hand, can be more difficult
to describe, and are less tangible and more influenced
by culture. However, these soft elements are as
important as the hard elements if the organization is
going to be successful.
The way the model is presented depicts the
interdependency of the elements and indicates
how a change in one affects all the others.
Placing Shared Values in the middle of the
model emphasizes that these values are central
to the development of all the other critical
elements. The company's structure, strategy,
systems, style, staff and skills all stem from why
the organization was originally created, and what
it stands for. The original vision of the company
was formed from the values of the creators. As
the values change, so do all the other elements.
Strategy: the plan devised to maintain and build
competitive advantage over the competition.

Structure: the way the organization is structured

and who reports to whom.

Systems: the daily activities and procedures that

staff members engage in to get the job done.

Shared Values: called "superordinate goals"

when the model was first developed, these are
the core values of the company that are
evidenced in the corporate culture and the
general work ethic.
Style: the style of leadership adopted.

Staff: the employees and their general

capabilities.

Skills: the actual skills and competencies

of the employees working for the
company.
Total Quality Management (TQM)
Approach
This management is initiated by W. Edward
Deming While he was working in Toyota
Company in Japan.
It is a total concept of management that
undertakes all parts and activities of the
organization into one unified whole so that
the quality performance of tasks can be
achieved as a unified goal of management.
It involves with : continuous improvement,
employee involvement, and customer
satisfaction.
TQM Wheel
 Total Quality Management (TQM)
Approach

Concept of TQM
Total Quality Management consists of
continuous improvement activities
involving everyone in the organization
in a totally integrated effort toward
improving performance at every level. -
ADC, USA. quoted by Goetsch and Davis,
1997
 Concept continues
Total Quality Management is a
philosophy that involves everyone in
an organization in the quest for
quality with customer satisfaction as
the driving force. –Stevenson
Quality Gurus
W Edward Deming (14 –Points)
Philip B. Crosby (14 Steps of TQM)
Joseph M. Juran (Trilogy)
Total Quality Management (TQM)
Approach
Total quality management needs a new
culture in the organization with a new
paradigm of ethics and philosophy.
It says that management is customer
oriented activities in order to ensure
customer satisfaction and with this
direction all tasks of the management will
be done.
 TQM Culture

The priority is given to customer satisfaction

Decision is long term
Emphasis in on prevention.
Application of systems
Responsibility of quality performance to
everyone
Team problem solving.
Procurement is based on partnership.
Management is to delegate, coach, facilitate
and mentor.