Historical Background of Management: Use This Learning Outline As You Read and Study This Chapter

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Chapter
Use this Learning Outline as you read and study this chapter.
Historical Background of Management
• Explain why studying management history is important.
• Describe some early evidences of management practice.
Scientific Management
• Describe the important contributions made by Frederick W. Taylor
and Frank and Lillian Gilbreth.
• Explain how today’s managers use scientific management.
General Administrative Theory

• Discuss Fayol’s contributions to management theory.
• Describe Max Weber’s contribution to management theory.
• Explain how today’s managers use general administrative theories of management.
Quantitative Approach
• Explain what the quantitative approach has contributed to the field of management.
• Discuss how today’s managers use the quantitative approach.
Toward Understanding Organizational Behavior

• Describe the contributions of the early advocates of OB.
• Explain the contributions of the Hawthorne Studies to the field of management.
• Discuss how today’s managers use the behavioral approach.
The Systems Approach

• Describe an organization using the systems approach.
• Discuss how the systems approach helps us understand management.
The Contingency Approach

• Explain how the contingency approach differs from the early theories of management.
• Discuss how the contingency approach helps us understand management.
Current Trends and Issues

• Explain why we need to look at the current trends and issues facing managers.
• Describe the current trends and issues facing managers.
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26
Management with Rolls Access Code, Ninth Edition, by Stephen P. Robbins and Mary Coulter. Published by Prentice Hall.
Copyright © 2007 by Pearson Education, Inc.
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Management Yesterday
and Today
“Deliver more based on less.” That’s the product design approach that John R. Hoke III
now wants his designers to use as they create new footwear.1 As the vice president of
global footwear design for Nike, Hoke leads an international team of global footwear
designers responsible for dreaming up, creating, and commercializing hundreds of
footwear styles each year. This new approach to sustainable design came from a
corporate-wide mission called “Nike Considered,” which has been described as “an
entirely new perspective, where innovation meets conservation.” (See a description of
Nike Considered at www.nike.com.nikebiz/nikeconsidered.)
Hoke’s team of designers isn’t afraid to push the design envelope. They’re the ones
who created the radically new cushioning systems used in Nike Air and Nike Shox. They’re
also the ones who designed the distinctive barefoot running sneakers called
“Nike Free.” Now Hoke is pushing his team to look at nature as a guide and
to “take out what is not necessary” when designing new products. So how
has Hoke encouraged his team to be innovative as they “consider” sustainable
design? One thing he does is send teams on “design inspiration trips.” For
instance, designers have gone to the zoo to observe and sketch animals’ feet.
Designers also draw inspiration from an annual trip to the Detroit car show,
where they study lines, silhouettes, styling, function, and color schemes of the
automobiles. Another source of inspiration came from a study of origami. As
part of this learning experience, Hoke brought in an Israeli origami artist for
three days to instruct the designers on paper folding. Says Hoke, “The ideas
that have come from that session are phenomenal. It forced us to look deeper
at flexibility and how geometry works.” Another lesson involved building an
ergonomic chair out of cardboard; participants had to focus on bending and
folding to hold the chair together instead of using traditional glue. Hoke then
made that assignment more interesting by having the chairs judged based on
whether they could hold people during a contest of musical chairs.
Although being innovative is the norm with Hoke’s design team,
innovation also will be critically important throughout the rest of the
company if it is to continue to be an industry leader. Put yourself in
Hoke’s position. What advice could he give other company
managers who wanted to encourage innovative thinking?
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28 Part One Introduction
N
ike’s push to come up with something innovative for the marketplace isn’t all
that unusual today. Many organizations, large and small, have made similar
commitments to pursuing innovation with all its challenges and rewards.
Why? Global competition and general competitive pressures reflect today’s reality:
innovate or lose. Although John Hoke was innovative in how he inspired his employ-
ees to think in new ways about shoe design, he recognized that it’s not always easy to
implement new ideas. In fact, the history of management is filled with evolutions and
revolutions in implementing new ideas.
Looking at management history can help us understand today’s management the-
ory and practice. It can help us see what did and did not work. In this chapter, we’ll
introduce you to the origins of many contemporary management concepts and show
Q&A
how they have evolved to reflect the changing needs of organizations and society as a
Can looking at management history whole. We’ll also introduce important trends and issues that managers currently face,
help me be a better manager? Go to
Q & A 2.1 to find out.
in order to link the past with the future and to demonstrate that the field of manage-
ment is still evolving. ( Go to www.prenhall.com/rolls)
HISTORICAL BACKGROUND OF MANAGEMENT

Organized endeavors directed by people responsible for planning, organizing, lead-
ing, and controlling activities have existed for thousands of years. The Egyptian pyra-
mids and the Great Wall of China, for instance, are tangible evidence that projects of
tremendous scope, employing tens of thousands of people, were completed in ancient
times. The pyramids are a particularly interesting example. The construction of a sin-
gle pyramid occupied more than 100,000 workers for 20 years.2 Who told each worker
what to do? Who ensured that there would be enough stones at the site to keep work-
ers busy? The answer to such questions is managers. Regardless of what these individu-
als were called, someone had to plan what was to be done, organize people and mate-
rials to do it, lead and direct the workers, and impose some controls to ensure that
everything was done as planned.
Another example of early management can be seen during the 1400s in the city of
Venice, a major economic and trade center. The Venetians developed an early form of
business enterprise and engaged in many activities common to today’s organizations.
For instance, at the arsenal of Venice, warships were floated along the canals and at
each stop, materials and riggings were added to the ship. Doesn’t that sound a lot like
a car “floating” along an automobile assembly line and components being added to it?
In addition to this assembly line, the Venetians also used warehouse and inventory sys-
tems to keep track of materials, human resource management functions to manage
the labor force, and an accounting system to keep track of revenues and costs.3
As these examples demonstrate, organizations and managers have been around
for thousands of years. However, two historical events are especially significant to the
study of management.
First, in 1776, Adam Smith published The Wealth of Nations, in which he argued the
economic advantages that organizations and society would gain from the division of
labor (or job specialization)—the breakdown of jobs into narrow and repetitive tasks.
Using the pin industry as an example, Smith claimed that 10 individuals, each doing a
specialized task, could produce about 48,000 pins a day among them. However, if each
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person worked alone, performing each task separately, it would be quite an accom-
plishment to produce even 10 pins a day! Smith concluded that division of labor
increased productivity by increasing each worker’s skill and dexterity, by saving time
Chapter Two Management Yesterday and Today 29
lost in changing tasks, and by creating labor-saving inventions and machinery. The
continued popularity of division of labor—for example, specific tasks performed by
members of a hospital surgery team, specific meal preparation tasks done by workers
in restaurant kitchens, or specific positions played by players on a football team—is
undoubtedly due to the economic advantages cited by Adam Smith.
The second important event, which started in the late eighteenth century, is the
industrial revolution. During this time, machine power was substituted for human
power, making it more economical to manufacture goods in factories rather than at
home. These large efficient factories needed managers to forecast demand, ensure
that enough material was on hand to make products, assign tasks to people, direct
daily activities, and so forth. The need for formal theories to guide managers in run-
ning these large organizations had arrived. However, it wasn’t until the early 1900s
that the first steps toward developing such theories were taken.
In the next sections we present the six major approaches to management: scien-
tific management, general administrative, quantitative, organizational behavior, sys-
tems, and contingency (see Exhibit 2–1). Keep in mind that each approach is con-
cerned with the same “animal”; the differences reflect the backgrounds and interests
of the writer. A relevant analogy is the classic story of the blind men and the elephant,
in which each man declares the elephant to be like the part he is feeling: The first man
touches the side and declares that the elephant is like a wall; the second touches the
trunk and says the elephant is like a snake; the third feels one of the elephant’s tusks
and believes the elephant to be like a spear; the fourth grabs a leg and says an ele-
phant is like a tree; and the fifth touches the elephant’s tail and concludes that the ani-
mal is like a rope. Each is encountering the same elephant, but what each observes
depends on where he stands. Similarly, each of the six perspectives is correct and con-
tributes to our overall understanding of management. However, each is also a limited
view of a larger animal. We’ll begin our journey into management’s past by looking at
the first major theory of management—scientific management.
Exhibit 2–1 Development of Major Management Theories
Management Theories
General
Historical Scientific Administrative Quantitative Organizational Systems Contingency
Background Management Theorists Approach Behavior Approach Approach
Early Examples Early

of Management Advocates
Adam Smith Hawthorne

Studies
Industrial
Revolution
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division of labor (or job specialization) industrial revolution

The breakdown of jobs into narrow and repetitive tasks. The substitution of machine power for human power,
which made it more economical to manufacture goods in
factories rather than at home.
• Explain why studying management history is • Describe some early evidences of management
important. practice.
SCIENTIFIC MANAGEMENT
If you had to pinpoint the year modern management theory was born, 1911 might be
a logical choice. That was the year Frederick Winslow Taylor’s Principles of Scientific
Management was published. Its contents became widely accepted by managers around
the world. The book described the theory of scientific management: the use of scien-
tific methods to define the “one best way” for a job to be done.
Important Contributions
Frederick W. Taylor and Frank and Lillian Gilbreth made important contributions to
scientific management theory. Let’s look at what they did.
Frederick W. Taylor Taylor worked at the Midvale and Bethlehem Steel Companies
in Pennsylvania. As a mechanical engineer with a Quaker and Puritan background, he
was continually appalled by workers’ inefficiencies. Employees used vastly different
techniques to do the same job. They were inclined to “take it easy” on the job, and
Taylor believed that worker output was only about one-third of what was possible.
Virtually no work standards existed. Workers were placed in jobs with little or no con-
cern for matching their abilities and aptitudes with the tasks they were required to do.
Taylor set out to correct the situation by applying the scientific method to shop-floor
jobs. He spent more than two decades passionately pursuing the “one best way” for
such jobs to be done.
Taylor’s experiences at Midvale led him to define clear guidelines for improving
production efficiency. He argued that these four principles of management (see
Exhibit 2–2) would result in prosperity for both workers and managers.4 How did
these scientific principles really work? Let’s look at an example.
Probably the best-known example of Taylor’s scientific management efforts was
the pig iron experiment. Workers loaded “pigs” of iron (each weighing 92 pounds)
onto railcars. Their daily average output was 12.5 tons. However, Taylor believed that
by scientifically analyzing the job to determine the “one best way” to load pig iron, out-
put could be increased to 47 or 48 tons per day. After scientifically applying different
Frederick W. Taylor (1856–1915) was the father of scientific

management. Working at Midvale Steel Company, Taylor
witnessed many inefficiencies. He sought to create a mental
revolution among both workers and managers by defining
clear guidelines for improving production efficiency.
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Exhibit 2–2 1. Develop a science for each element of an individual’s work, which will replace the old
rule-of-thumb method.
Taylor’s Four Principles
of Management 2. Scientifically select and then train, teach, and develop the worker.
3. Heartily cooperate with the workers so as to ensure that all work is done in accordance
with the principles of the science that has been developed.
4. Divide work and responsibility almost equally between management and workers.
Management takes over all work for which it is better fitted than the workers.
combinations of procedures, techniques, and tools, Taylor succeeded in getting that

level of productivity. How? He put the right person on the job with the correct tools
Q&A and equipment, had the worker follow his instructions exactly, and motivated the
Frederick Taylor sounds like a worker with an economic incentive of a significantly higher daily wage. ( Go to
pretty strict manager.Was he?
Q & A 2.2 explains.
www.prenhall.com/rolls) Using similar approaches for other jobs, Taylor was able to
define the “one best way” for doing each job. Overall, Taylor achieved consistent pro-
ductivity improvements in the range of 200 percent or more. For his groundbreaking
studies of manual work using scientific principles, Taylor became known as the
“father” of scientific management. His ideas spread in the United States, France,
Germany, Russia, and Japan, and inspired others to study and develop methods of sci-
entific management. His most prominent followers were Frank and Lillian Gilbreth.
Frank and Lillian Gilbreth A construction contractor by trade, Frank Gilbreth
gave up that career to study scientific management after hearing Taylor speak at a pro-
fessional meeting. Frank and his wife Lillian, a psychologist, studied work to eliminate
inefficient hand-and-body motions. The Gilbreths also experimented with the design
and use of the proper tools and equipment for optimizing work performance.5
Frank is probably best known for his experiments in bricklaying. By carefully ana-
lyzing the bricklayer’s job, he reduced the number of motions in laying exterior brick
from 18 to about 5, and on laying interior brick the motions were reduced from 18 to 2.
Using Gilbreth’s techniques, a bricklayer was more productive and less fatigued at the
end of the day.
The Gilbreths were among the first researchers to use motion pictures to study
hand-and-body motions. They invented a device called a microchronometer that
recorded a worker’s motions and the amount of time spent doing each motion.
Wasted motions missed by the naked eye could be identified and eliminated. The
Frank and Lillian Gilbreth, parents of 12

children, ran their household using scientific
management principles and techniques. Two of
their children wrote a book, Cheaper by the
Dozen, which described life with the two
masters of efficiency.
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scientific management
Using the scientific method to determine the “one best
way” for a job to be done.
Gilbreths also devised a classification scheme to label 17 basic hand motions (such as
search, grasp, hold), which they called therbligs (Gilbreth spelled backward with the
th transposed). This scheme allowed the Gilbreths a more precise way of analyzing a
worker’s exact hand movements.
How Do Today’s Managers Use Scientific Management?

The guidelines that Taylor and others devised for improving production efficiency are
still used in organizations today.6 For instance, when an employee is sorting a stack of
papers and the papers are all aligned except they’re upside down, is it more efficient
to turn each paper right-side up as it’s sorted or to turn the whole stack right-side up?
When managers analyze the basic work tasks that must be performed, use time-and-
motion study to eliminate wasted motions, hire the best qualified workers for a job,
Q&A and design incentive systems based on output, they’re using the principles of scientific
How is scientific management a management. ( Go to www.prenhall.com/rolls) But current management prac-
“management” theory if it was tice isn’t restricted to scientific management. In fact, we can see ideas from the next
focused on improving laborers’ jobs?
See Q & A 2.3 for an explanation. major approach—general administrative theory—being used as well.
• Describe the important contributions made by • Explain how today’s managers use scientific
Frederick W. Taylor and Frank and Lillian Gilbreth. management.
GENERAL ADMINISTRATIVE THEORY

Another group of writers looked at the subject of management from the perspective of
the entire organization. This approach, known as general administrative theory,
described what managers do and what constituted good management practice. Let’s
look at some important contributions of this perspective.
The two most prominent theorists behind the general administrative approach were
Henri Fayol and Max Weber.
Henri Fayol We introduced Fayol in Chapter 1 because he identified five functions

of managers: planning, organizing, commanding, coordinating, and controlling.
Because his ideas were important, let’s look closer at what he had to say.7
Fayol wrote during the same time period as Taylor. While Taylor was concerned
with first-line managers and the scientific method, Fayol’s attention was directed
toward the activities of all managers. He wrote from personal experience as he was the
managing director of a large French coal-mining firm.
Fayol described the practice of management as something distinct from accounting,
finance, production, distribution, and other typical business functions. His belief that
management was an activity common to all business endeavors, government, and even
in the home led him to develop 14 principles of management—fundamental rules of
Q&A management that could be taught in schools and applied in all organizational situations.
Why is Taylor considered the “father These principles are shown in Exhibit 2–3. ( Go to www.prenhall.com/rolls)
of management” when Fayol was
the one who actually studied
managers? Check out Q & A 2.4. Max Weber Weber (pronounced VAY-ber) was a German sociologist who studied
organizations. Writing in the early 1900s, he developed a theory of authority structures
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and relations.8 Weber described an ideal type of organization he called a

bureaucracy—a form of organization characterized by division of labor, a clearly
defined hierarchy, detailed rules and regulations, and impersonal relationships.
Exhibit 2–3 1. Division of work. Specialization increases output by making employees more efficient.
Fayol’s 14 Principles 2. Authority. Managers must be able to give orders and authority gives them this right.
of Management 3. Discipline. Employees must obey and respect the rules that govern the organization.
4. Unity of command. Every employee should receive orders from only one superior.
5. Unity of direction. The organization should have a single plan of action to guide
managers and workers.
6. Subordination of individual interests to the general interest. The interests of any one
employee or group of employees should not take precedence over the interests of the
organization as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.
8. Centralization. This term refers to the degree to which subordinates are involved in
decision making.
9. Scalar chain. The line of authority from top management to the lowest ranks is the scalar
chain.
10. Order. People and materials should be in the right place at the right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. Management should provide orderly personnel planning
and ensure that replacements are available to fill vacancies.
13. Initiative. Employees who are allowed to originate and carry out plans will exert high
levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity within the
organization.
Weber recognized that this “ideal bureaucracy” didn’t exist in reality. Instead he
intended it as a basis for theorizing about how work could be done in large groups.
His theory became the model structural design for many of today’s large organiza-
tions. The features of Weber’s ideal bureaucratic structure are outlined in Exhibit 2–4.
Bureaucracy, as described by Weber, is a lot like scientific management in its ide-
ology. Both emphasize rationality, predictability, impersonality, technical competence,
and authoritarianism. Although Weber’s writings were less practical than Taylor’s, the
fact that his “ideal type” still describes many contemporary organizations attests to the
importance of his work.
How Do Today’s Managers Use General

Administrative Theories?
Some of our current management ideas and practices can be directly traced to the
contributions of general administrative theory. For instance, the functional view of the
manager’s job can be attributed to Fayol. In addition, his 14 principles serve as a frame
of reference from which many current management concepts have evolved.
Weber’s bureaucracy was an attempt to formulate an ideal prototype for organiza-
tions. Although many characteristics of Weber’s bureaucracy are still evident in large
organizations, his model isn’t as popular today as it was in the twentieth century. Many
therbligs principles of management bureaucracy

A classification scheme for labeling 17 basic hand Fundamental rules of management that could be taught A form of organization characterized by division of labor,
motions. in schools and applied in all organizational situations. a clearly defined hierarchy, detailed rules and regula-
tions, and impersonal relationships.
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general administrative theory

A theory of management that focused on describing
what managers do and what constitutes good manage-
ment practice.
Exhibit 2–4 Weber’s Ideal Bureaucracy

Jobs broken down
into simple, routine,
and well-defined tasks
Managers are career Positions organized
professionals, not in a hierarchy with
owners of units they a clear chain
manage of command
Division
of Labor
Career Authority
Orientation Hierarchy
A bureaucracy
should have
Impersonality Formal
Selection
Formal Rules
Uniform application and Regulations People selected for
of rules and controls, jobs based on
not according to technical qualifications
personalities
System of written
rules and standard
operating procedures
contemporary managers feel that bureaucracy’s emphasis on strict division of labor,

adherence to formal rules and regulations, and impersonal application of rules and
controls hinders individual employees’ creativity and the organization’s ability to
respond quickly to an increasingly dynamic environment. However, even in highly
flexible organizations of creative professionals—such as Samsung, General Electric, or
Cisco Systems—some bureaucratic mechanisms are necessary to ensure that resources
are used efficiently and effectively.
• Discuss Fayol’s contributions to management theory. • Explain how today’s managers use general
• Describe Max Weber’s contribution to management administrative theories of management.
theory.
QUANTITATIVE APPROACH TO MANAGEMENT

Although passengers bumping into each other when trying to find their seats on an
airplane can be a mild annoyance for them, it’s a bigger problem for airlines because
of the backed-up lines it can create, slowing how quickly the plane can take off. Based
on research in space–time geometry, America West Airlines innovated a unique board-
ing process called “reverse pyramid” that has saved at least 2 minutes in boarding
time.9 This is an example of the quantitative approach, which involves the use of quan-
titative techniques to improve decision making. This approach also has been called
operations research or management science.
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The quantitative approach evolved from the development of mathematical and statis-
tical solutions to military problems during World War II. After the war was over, many
of the techniques that had been used for military problems were applied to businesses.
One group of military officers, nicknamed the Whiz Kids, joined Ford Motor
Company in the mid-1940s and immediately began using statistical methods and
quantitative models to improve decision making. Two of these individuals whose
names you might recognize are Robert McNamara (who went on to become president
of Ford, U.S. Secretary of Defense, and head of the World Bank) and Charles “Tex”
Thornton (who founded Litton Industries).
What exactly does the quantitative approach do? It involves applications of statis-
tics, optimization models, information models, and computer simulations to manage-
ment activities. Linear programming, for instance, is a technique that managers use to
improve resource allocation decisions. Work scheduling can be more efficient as a
result of critical-path scheduling analysis. The economic order quantity model helps
managers determine optimum inventory levels. Each of these is an example of quanti-
tative techniques being applied to improve managerial decision making.
How Do Today’s Managers Use the Quantitative Approach?

At Circuit City’s 600-plus locations, everything from the clothes the floor salespeople
wear to how long 0 percent financing should be offered has been studied by statisticians.
They found, for instance, that flat commissions worked better than the product-based
commissions that had been used for over 48 years. This and other findings led to com-
pany changes that in one year alone contributed an estimated $300 million in sales.
The quantitative approach contributes directly to management decision making in
the areas of planning and control. For instance, when managers make budgeting,
scheduling, quality control, and similar decisions, they typically rely on quantitative
techniques. Specialized software has made the use of quantitative techniques somewhat
less intimidating for managers, although they must still be able to interpret the results.
We cover some of the more important quantitative techniques in Chapters 6, 9 and 18.
Despite its potential impact on managerial decision making, the quantitative
approach hasn’t influenced management practice as much as the next one we’re going
to discuss—organizational behavior—for a number of reasons. These include the fact
that many managers are unfamiliar with and intimidated by the quantitative tools,
behavioral problems are more widespread and visible, and it is easier for most students
and managers to relate to real, day-to-day people problems than to quantitative models.
After Marla (right) and Bonnie Schaefer,

co-CEOs and chairs of the board,
inherited Claire’s Stores, Inc., a chain of
jewelry and accessories outlets for teens
and tweens, from their father, they
quickly shifted the company’s buying
strategies. Profits have nearly doubled
thanks to their relying on quantitative
methods to guide their buyers, such as
market research to track teen trends,
instead of relying on the buyers’
personal taste, as their father did. The
sisters also studied the profit margins of
Claire’s many product lines and changed
focus to sell more jewelry, that has
higher margins.
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quantitative approach
The use of quantitative techniques to improve decision
making.
• Explain what the quantitative approach has • Discuss how today’s managers use the quantitative
contributed to the field of management. approach.
TOWARD UNDERSTANDING ORGANIZATIONAL BEHAVIOR

As we know, managers get things done by working with people. This explains why
some writers have chosen to look at management by focusing on the organization’s
people. The field of study concerned with the actions (behavior) of people at work is
called organizational behavior (OB). Much of what currently makes up the field of
human resource management, as well as contemporary views on motivation, leader-
ship, trust, teamwork, and conflict management, has come out of organizational
behavior research.
Early Advocates
Although several individuals in the late 1800s and early 1900s recognized the impor-
tance of people to an organization’s success, four stand out as early advocates of the
OB approach: Robert Owen, Hugo Munsterberg, Mary Parker Follett, and Chester
Barnard. Their contributions were varied and distinct, yet they all believed that people
were the most important asset of the organization and should be managed accord-
ingly. Their ideas provided the foundation for such management practices as
employee selection procedures, employee motivation programs, employee work
teams, and organization–environment management techniques. Exhibit 2–5 summa-
rizes the most important ideas of these early advocates.
Exhibit 2–5 Early Advocates of OB
• Concerned about deplorable

working conditions
• Proposed idealistic workplace
• Actual manager who thought • Argued that money spent
organizations were social improving labor was smart • Pioneer in field of industrial
systems that required investment psychology—scientific study of
cooperation people at work
• Believed manager’s job was to • Suggested using psychological
communicate and stimulate tests for employee selection,
employees’ high levels of effort learning theory concepts for
• First to argue that organizations Robert Owen employee training, and study
were open systems Late 1700s of human behavior for
employee motivation
Chester Barnard Early Advocates Hugo Munsterberg

1930s of OB Early 1900s
Mary Parker Follett

Early 1900s
• One of the first to recognize that

organizations could be viewed
from perspective of individual
and group behavior
•
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Proposed more people-oriented

ideas than scientific manage-
ment followers
• Thought organizations should
be based on group ethic
The Hawthorne Studies

Without question, the most important contribution to the emergent OB field came
out of the Hawthorne Studies, a series of studies conducted at the Western Electric
Company Works in Cicero, Illinois. These studies, which started in 1924, were initially
designed by Western Electric industrial engineers as a scientific management experi-
ment. They wanted to examine the effect of various lighting levels on worker produc-
tivity. Like any good scientific experiment, control and experimental groups were set
up with the experimental group being exposed to various lighting intensities, and the
control group working under a constant intensity. If you were the industrial engineers
in charge of this experiment, what would you have expected to happen? It’s logical to
think that individual output in the experimental group would be directly related to
the intensity of the light. However, they found that as the level of light was increased in
the experimental group, output for both groups increased. Then, much to the sur-
prise of the engineers, as the light level was decreased in the experimental group, pro-
ductivity continued to increase in both groups. In fact, a productivity decrease was
observed in the experimental group only when the level of light was reduced to that of
a moonlit night. What would explain these unexpected results? The engineers weren’t
sure, but they concluded that lighting intensity was not directly related to group pro-
ductivity, and that something else must have contributed to the results. They weren’t
able to pinpoint what that “something else” was, though.
In 1927, the Western Electric engineers asked Harvard professor Elton Mayo and
his associates to join the study as consultants. Thus began a relationship that would last
through 1932 and encompass numerous experiments in the redesign of jobs, changes
in workday and workweek length, introduction of rest periods, and individual versus
group wage plans.10 For example, one experiment was designed to evaluate the effect
of a group piecework incentive pay system on group productivity. The results indi-
cated that the incentive plan had less effect on a worker’s output than did group pres-
sure, acceptance, and security. The researchers concluded that social norms or group
standards were the key determinants of individual work behavior.
Scholars generally agree that the Hawthorne Studies had a dramatic impact on
management beliefs about the role of people in organizations. Mayo concluded that
people’s behavior and attitudes are closely related, that group factors significantly
affect individual behavior, that group standards establish individual worker output,
and that money is less a factor in determining output than are group standards, group
attitudes, and security. These conclusions led to a new emphasis on the human behav-
ior factor in the management of organizations.
Although critics attacked the research procedures, analyses of findings, and con-
Q&A
clusions, it’s of little importance from a historical perspective whether the Hawthorne
The Hawthorne Studies were an
important turning point in
studies were academically sound or their conclusions justified.11 What is important is
management theory. that they stimulated an interest in human behavior in organizations. ( Go to
Q & A 2.5 explains why. www.prenhall.com/rolls)
How Do Today’s Managers Use the Behavioral Approach?

The behavioral approach has largely shaped how today’s organizations are managed.
From the way that managers design jobs to the way that they work with employee teams
to the way that they use open communication, we can see elements of the behavioral
approach. Much of what the early OB advocates proposed and the conclusions from
the Hawthorne Studies provided the foundation for our current theories of motivation,
leadership, group behavior and development, and numerous other behavioral topics.
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organizational behavior (OB) Hawthorne Studies

The field of study concerned with the actions (behavior) A series of studies during the 1920s and 1930s that pro-
of people at work. vided new insights into individual and group behavior.
• Describe the contributions of the early advocates • Discuss how today’s managers use the behavioral
of OB. approach.
• Explain the contributions of the Hawthorne Studies
to the field of management.
THE SYSTEMS APPROACH

During the 1960s, management researchers began to analyze organizations from a sys-
tems perspective, a concept taken from the physical sciences. A system is a set of inter-
related and interdependent parts arranged in a manner that produces a unified
whole. The two basic types of systems are closed and open. Closed systems are not
influenced by and do not interact with their environment. In contrast, open systems
dynamically interact with their environment. Today, when we describe organizations
as systems, we mean open systems. Exhibit 2–6 shows a diagram of an organization
from an open systems perspective. As you can see, an organization takes in inputs
(resources) from the environment and transforms or processes these resources into
outputs that are distributed into the environment. The organization is “open” to and
interacts with its environment.
The Systems Approach and Managers

How does the systems approach contribute to our understanding of management?
Researchers envisioned an organization as being made up of “interdependent factors,
including individuals, groups, attitudes, motives, formal structure, interactions, goals,
status, and authority.”12 What this means is that as managers coordinate work activities
in the various units of the organization, they ensure that all these interdependent
units are working together so that the organization’s goals can be achieved. For exam-
ple, the systems approach would recognize that, no matter how efficient the produc-
tion department might be, if the marketing department doesn’t anticipate changes in
customer tastes and work with the product development department in creating prod-
ucts customers want, the organization’s overall performance will suffer.
In addition, the systems approach implies that decisions and actions taken in one
organizational area will affect others and vice versa. For example, if the purchasing
department doesn’t acquire the right quantity and quality of inputs, the production
department will not be able to do its job effectively.
Exhibit 2–6 Environment
The Organization as an
Open System System
Transformation
Inputs Process Outputs
Raw Materials Employees’ Work Products and Services

Human Resources Activities Financial Results
Capital Management Activities Information
Technology Technology and Human Results
Information Operations Methods
Feedback
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E n v ir o n m e n t
Finally, the systems approach recognizes that organizations are not self-contained.
They rely on their environment for essential inputs and as outlets to absorb their out-
puts. No organization can survive for long if it ignores government regulations, sup-
plier relations, or the varied external constituencies upon which it depends. (We’ll
cover these external forces in Chapter 3.)
How relevant is the systems approach to management? Quite relevant. Think, for
example, of a day-shift manager at a local Wendy’s restaurant who every day must coor-
Q&A dinate the work of employees filling customer orders at the front counter and the drive-
As a manager, why should I be through windows, direct the delivery and unloading of food supplies, and address any
concerned with understanding how
my organization works as a system? customer concerns that arise. This manager “manages” all parts of the “system” so that
Go to Q & A 2.6 to find out. the restaurant meets its daily sales goals. ( Go to www.prenhall.com/rolls)
• Describe an organization using the systems • Discuss how the systems approach helps us
approach. understand management.
THE CONTINGENCY APPROACH

Early management theorists such as Taylor, Fayol, and Weber gave us principles of man-
agement that they generally assumed to be universally applicable. Later research found
exceptions to many of their principles. For example, division of labor is valuable and
widely used, but jobs can become too specialized. Bureaucracy is desirable in many situa-
Self Assessment tions, but in other circumstances, other structural designs are more effective. Management
Library (S.A.L.) is not (and cannot be) based on simplistic principles to be applied in all situations.
I get it . . . organizations face Different and changing situations require managers to use different approaches and tech-
changing situations. But I’m niques. The contingency approach (sometimes called the situational approach) says that
not too sure how well I’ll adapt
to all that change. organizations are different, face different situations (contingencies), and require differ-
Complete S.A. L. #III.C.1 to find out. ent ways of managing. ( Go to www.prenhall.com/rolls)
The Contingency Approach and Managers

The contingency approach can be described as “if, then.” If this is the way my situation
is, then this is the best way for me to manage. It’s intuitively logical because organiza-
tions and even units within the same organization are diverse—in size, goals, work activi-
ties, and the like. It would be surprising to find universally applicable management
rules that would work in all situations. But, of course, it’s one thing to say that the way
to manage “depends on the situation” and another to say what the situation is.
Management researchers have been working to identify these situational or “what” vari-
ables. Exhibit 2–7 describes four popular contingency variables. The list is by no means
Q&A comprehensive—more than 100 different “what” variables have been identified—but it
Saying “it all depends” seems like represents those most widely used and gives you an idea of what we mean by the term
I’ll never have any guidance on the contingency variable. As you can see, the contingency variables can have a significant
best way to manage people or impact on managers. The primary value of the contingency approach is that it stresses
situations.True? Q & A 2.7 and 2.8
tell you why the contingency there are no simplistic or universal rules for managers to follow. ( Go to
approach is valuable to managers. www.prenhall.com/rolls)
system open systems contingency approach

A set of interrelated and interdependent parts arranged Systems that interact with their environment. Management approach that says that organizations are
in a manner that produces a unified whole. different, face different situations (contingencies), and
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closed systems require different ways of managing.

Systems that are not influenced by and do not interact
with their environment.
Exhibit 2–7 Organization Size. As size increases, so do the problems of coordination. For instance, the type
of organization structure appropriate for an organization of 50,000 employees is likely to be
Popular Contingency inefficient for an organization of 50 employees.
Variables
Routineness of Task Technology. To achieve its purpose, an organization uses technology.
Routine technologies require organizational structures, leadership styles, and control systems
that differ from those required by customized or nonroutine technologies.
Environmental Uncertainty. The degree of uncertainty caused by environmental changes
influences the management process. What works best in a stable and predictable environment
may be totally inappropriate in a rapidly changing and unpredictable environment.
Individual Differences. Individuals differ in terms of their desire for growth, autonomy, tolerance
of ambiguity, and expectations. These and other individual differences are particularly
important when managers select motivation techniques, leadership styles, and job designs.
• Explain how the contingency approach differs from • Discuss how the contingency approach is
the early theories of management. appropriate for studying management.
CURRENT TRENDS AND ISSUES

What current management concepts and practices are shaping “tomorrow’s history”?
In this section, we’ll attempt to answer that question by introducing several trends and
issues that we believe are changing the way managers do their jobs. We introduced you
to two important trends in Chapter 1—customer service management and innovation.
In this chapter, we’ll examine others including globalization, ethics, workforce diver-
sity, entrepreneurship, e-business, knowledge management and learning organiza-
tions, and quality management. Throughout the text we focus more closely on these
issues in various boxes, examples, and exercises included in each chapter.
Globalization
Managers are no longer constrained by national borders. BMW builds cars in South
Carolina. McDonald’s sells hamburgers in China. Toyota makes cars in Kentucky.
Australia’s leading real-estate company, Lend Lease Corporation, built the Bluewater
shopping complex in Kent, England, and contracted with Coca-Cola to build bottling
plants in Southeast Asia. Danish toy maker Lego Group opened factories and a distri-
bution center in the Czech Republic. Swiss company ABB Ltd. constructed power-
generating plants in Malaysia, South Korea, China, and Indonesia. As these examples
illustrate, the world has definitely become a global village, leading to important
changes in the manager’s job.
WORKING WITH PEOPLE FROM DIFFERENT CULTURES. Even in your own country, you’re
likely to find yourself working with bosses, peers, and other employees who were born
or raised in different cultures. What motivates you may not motivate them. Or your
style of communication may be direct and open, but they may find this approach
uncomfortable and threatening. To work effectively with a group of diverse people,
you’ll need to understand how their culture, geography, and religion have shaped
their values, attitudes, and beliefs and adjust your management style accordingly.
COPING WITH ANTICAPITALIST BACKLASH. Capitalism’s emphasis on profits, efficiency,

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and growth may be generally accepted in the United States, Australia, and Hong Kong,
but that emphasis is not nearly as popular in places like France, the Middle East, or the
Scandinavian countries. Managers at global companies like Coca-Cola, McDonald’s, or
Textile workers in Italy are facing some of the

challenges of globalization as inexpensive
imports from Asia force the Italian clothing
industry to cut jobs. But Italy’s 120,000-member
textile union, Filtea, is taking a controversial
stand. The union leadership believes that the
best way to protect Italian workers and their
jobs is not to impose protective duties or
quotas or to strike, but rather to press for
better working conditions, tax breaks for
corporate research, and ultimately better
Italian products that will be more competitive
through streamlined manufacturing processes.
Procter & Gamble have come to realize that economic values aren’t universally trans-
ferable. Management practices need to be modified to reflect the values of the differ-
ent countries in which an organization operates.
MOVEMENT OF JOBS TO COUNTRIES WITH LOW-COST LABOR. Globalization means busi-

nesses can hire, source, and sell wherever they want. It’s increasingly difficult for man-
agers in economically advanced nations, where minimum wages are typically $6 or more
an hour, to compete against companies who rely on workers from developing nations
where labor is available for 30 cents an hour. It’s not by chance that a good portion of
Americans wear clothes made in China, work on computers whose parts came from
Thailand, and watch movies filmed in Canada. In a global economy, jobs tend to flow to
places where lower costs provide businesses with a comparative advantage. This “out-
sourcing” of jobs, however, has taken a new and unexpected turn, especially for those
who think that the movement of jobs to countries with low-cost labor only affects factory
workers and call-center operators. A number of low-cost countries are now graduating
“large numbers of well-educated young people fully qualified to work in an information-
based economy.”13 In 2005, there were 3.3 million college graduates in China and 3.1 mil-
lion in India (all of whom are English-speaking) and only 1.3 million in the United
States.14 Why is this important? Because the service-intensive economy of the United
States is especially vulnerable to potential outflows of information-based jobs. The impli-
cation for managers is that they must be prepared to deal with the difficult task of bal-
ancing the interests of their organization as it looks for ways to keep costs low and remain
competitive with their responsibilities to the communities within which they operate.
SUMMARY. Yes, globalization can be controversial, as these issues show. Regardless of
these controversies, managers in organizations of all sizes and types around the world
have to confront the challenges of operating in a global market.15 Globalization is such an
important topic that we devote one chapter to it (Chapter 4) and integrate discussion of
its impact on the various management functions throughout the text. A number of our
chapter-opening manager dilemmas, end-of-chapter cases, and chapter examples feature
global managers and organizations. To reinforce the importance of your need to “think
globally,” we’ve included on our R.O.L.L.S. Web site www.prenhall.com/rolls background
data on several countries and opportunities for you to use this country information as you
analyze a number of case scenarios at the end of Parts Two through Six.
Ethics
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Bernie Ebbers of WorldCom—sentenced to 25 years for fraud relating to his role in an

$11 billion accounting scandal. Former Enron CEO Jeff Skilling—charged with 35
counts including insider trading, fraud, conspiracy, and lying on financial statements.
John Rigas of Adelphia Communications—sentenced to 15 years on charges of fraud
and conspiracy. Former Tyco executives Dennis Kozlowski and Mark Swartz—sentenced
to 8¹⁄₃ to 25 years in prison and ordered to pay more than $239 million in restitution and
fines for looting nearly $600 million from their company.16 The sad reality is that after
these executives committed these crimes, their companies lay in ruins and the jobs and
retirement savings of thousands of their employees had vanished.
During the early years of this decade, it seemed as if every day brought to light
another case of corporate lying, misrepresentation, and financial manipulation. What
happened to managerial ethics? Ethical behavior seemed to have been forgotten or
ignored as these managers put their self-interest ahead of others who might be affected
by their decisions. Take, for example, the “Enron Three”—former chairman Ken Lay
(Ken Lay died July 6, 2006, in Aspen, Colorado, while awaiting sentencing on fraud
conviction.), former CEO Jeff Skilling, and former CFO Andy Fastow. Each behaved as
if the laws and accounting rules didn’t apply to him. They were greedy and manipula-
tive, and conspired to deceive their board of directors, employees, stockholders, and
others about Enron’s worsening financial condition. Because of these managers’ highly
unethical actions, thousands of Enron employees lost their jobs and the company stock
set aside in their retirement savings became worthless. Although Enron seemed to be
the most publicized example in this corporate ethics crisis, executives at a number of
other companies also were engaging in similar kinds of unethical actions.
What would you have done had you been a manager in these organizations? How
would you have reacted? One thing we know is that ethical issues aren’t simple or easy.
Make one decision and someone will be affected; make another, and someone else is
likely to be affected. In today’s changing workplace, managers need an approach to deal
with the complexities and uncertainties associated with the ethical dilemmas that arise.
We propose a process as outlined in Exhibit 2–8. What does this process entail? First,
managers need to make sure they understand the ethical dilemma they’re facing. They
need to step back and think about what issue (or issues) is at stake. Next, it’s important
to identify the stakeholders that would be affected by the decision. What individuals or
groups are likely to be impacted by my decision? Third, managers should identify the
factors that are important to the decision. These include personal, organizational, and
possibly external factors. We’ll cover these factors in detail in Chapter 5. Next, managers
should identify and evaluate possible courses of action, keeping in mind that each alter-
native will impact affected stakeholders differently. Then, it’s time to make a decision
and act. As today’s managers manage, they can use this process to help them assess those
ethical dilemmas they face and to develop appropriate courses of action.
Although most managers continue to behave ethically, these highly publicized
abuses highlight a need to “upgrade” ethical standards, a need that’s being addressed
at two levels. First, ethics education is being widely emphasized in college curriculums.
Second, organizations themselves are taking a more active role in creating and using
codes of ethics, providing ethics training programs, and hiring ethics officers. We want
to prepare you to deal with the ethics dilemmas you’re likely to face. Therefore, we’ve
included a “Thinking Critically About Ethics” box and an end-of-chapter ethics exer-
cise in almost every chapter. In addition, we’ve included five comprehensive integra-
tive and interactive ethics scenarios that you’ll find on our R.O.L.L.S. Web site
www.prenhall.com/rolls. You’ll have numerous opportunities to experience what it’s like
to deal with ethical issues and dilemmas!
Exhibit 2–8 Step 1: What is the ethical dilemma?
A Process for Addressing Step 2: Who are the affected stakeholders?

Ethical Dilemmas Step 3: What personal, organizational, and external factors are important to my decision?
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Step 4: What are possible alternatives?

Step 5: Make a decision and act on it.
Workforce Diversity
One of the most important issues currently facing managers is coordinating work
efforts of diverse organizational members in accomplishing organizational goals.
Self Assessment Today’s organizations are characterized by workforce diversity—a workforce that’s
Library (S.A.L.) heterogeneous in terms of gender, race, ethnicity, age, and other characteristics that
How comfortable am I being around reflect differences. ( Go to www.prenhall.com/rolls)
others who are different from me?
S.A. L. #I.B.4 can help you begin to How diverse is the U.S. workforce? A report called Workforce 2020 stated that the
understand your own attitudes U.S. labor force will continue to reflect increasing ethnic diversity, although at a
toward workplace diversity. slower pace.17 Between 1994 and 2005, minorities accounted for slightly more than
one-half of net new entrants to the U.S. workforce. From 2005 to 2020, the fastest
growth in the U.S. labor force will be Asian and Hispanic workers. In fact, Hispanics
have now surpassed African Americans as the largest minority group in the United
States.18 Another significant demographic force affecting workforce diversity dur-
ing the next decade will be the aging of the population, especially as the first wave
of baby boomers (a population group encompassing individuals born between the
years 1946 and 1964) turns 60. However, the impact may not be what you might
expect. New research suggests that the boomers will have the ability—and the
desire—to work productively and innovatively well beyond today’s normal retire-
ment age.19 What impact might this trend have on the U.S. workplace? Many of
these individuals may choose to continue working, either full-time or part-time,
especially because medical research is showing that work can actually help an indi-
vidual stay mentally and physically fit. Yet, for some other older workers who might
otherwise have chosen to retire, the weak performance of the stock market and its
effect on their retirement investment accounts have forced them to continue work-
ing. For whatever reason older workers may decide to continue working, many cor-
porations also have begun to recognize the extensive experience and knowledge
that mature employees bring to the workplace. To slow the “brain drain,” more
companies are “looking to keep older workers by investing in training programs
and flexible work schedules….”20 Although 61.5 million boomers currently make
up 42 percent of the U.S. workforce, Generation Y (which is typically described as
individuals born between 1977–1989) has been the fastest-growing segment of the
workforce, growing from 14 to 21 percent during 2000–2004.21 Eventually, there will
be some 70 million of these Gen Y’ers, and their workplace attitudes are likely to
create significant challenges for managers in the increasingly multigenerational
workplaces. We’ll study the challenges of managing generational differences in
more detail in Chapter 14. (Turn to the back of the book and check out the Skills
Module on Valuing Diversity.)
But workforce diversity isn’t just an issue for U.S. managers. It’s a concern for man-
agers in Canada, Australia, South Africa, Japan, Europe, and other countries. For
instance, Japanese managers from Hitachi, Matsushita, Sony, and other Japanese
multinationals manage Chinese employees in Dalian. The European Union trade
agreement, which opened up borders throughout much of western and now eastern
Europe, has increased workforce diversity in organizations that operate in countries
such as Spain, Germany, Italy, and France. Even in these and other economically
developed nations, managers are finding that they need to effectively manage diversity
as the level of immigration increases in Italy, the number of women entering the work-
force rises in Japan, and the population ages in Germany.22
Does the fact that workforce diversity is an issue today mean that organizations
weren’t diverse before? No. They were, but diverse individuals made up a small
percentage of the workforce, and organizations, for the most part, ignored the
issue. Before the early 1980s, people took a “melting pot” approach to differences.
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workforce diversity
A workforce that’s heterogeneous in terms of gender,
race, ethnicity, age, and other characteristics that reflect
differences.
We assumed that people who were “different” would want to assimilate. But we
now recognize that employees don’t set aside their cultural values and lifestyle
preferences when they come to work. The challenge for managers, therefore, is to
make their organizations more accommodating to diverse groups of people by
addressing different lifestyles, family needs, and work styles. The melting pot
assumption has been replaced by the recognition and celebration of differences.23
Smart managers recognize that diversity can be an asset because it brings a broad
range of viewpoints and problem-solving skills to a company, and additionally
helps organizations better understand a diverse customer base. Many companies
such as Altria, Citigroup, PepsiCo, and Turner Broadcasting have strong diversity
programs. 24 For example, in the Frito Lay division of PepsiCo, the Hispanic
employee affinity group provided input in the development of a line of guacamole-
flavored potato chips, which has become a $100 million product. 25 We’ll high-
light many diversity-related issues and how companies are responding to those
issues throughout this text in our “Managing Workforce Diversity” boxes. In
addition, you’ll find interactive diversity exercises on our R.O.L.L.S. Web site
www.prenhall.com/rolls.
Entrepreneurship
Entrepreneurship is an important global activity.26 But what exactly is entrepreneurship?
It’s the process of starting new businesses, generally in response to opportunities. Three
important themes are implied in this definition of entrepreneurship. First is the pursuit
of opportunities. Entrepreneurship is about pursuing environmental trends and
changes that no one else has seen or paid attention to. For example, Jeff Bezos, founder
of Amazon.com, was a successful programmer at an investment firm on Wall Street in
the mid-1990s. However, statistics on the explosive growth in the use of the Internet (at
that time, it was growing about 2,300 percent a month) kept nagging at him. He decided
to quit his job and pursue what he felt were going to be enormous online retailing
opportunities. Today, you can buy books, music, cars, furniture, jewelry, and numerous
other items on Amazon.
The second important theme in entrepreneurship is innovation. Entrepreneurship
involves changing, revolutionizing, transforming, or introducing new products or ser-
vices or new ways of doing business. Dineh Mohajer is a good example. As a fashion-
conscious young woman, she hated the brilliant and bright nail polishes for sale in
stores because the bright colors clashed with her trendy pastel-colored clothing. She
wanted pastel nail colors that would match what she was wearing. When she couldn’t
find the right shade of nail polish to match her strappy blue sandals, Mohajer decided
to mix her own. When her friends raved over her homemade colors, she decided to
Working part-time at an auto-body shop while

pursuing his master’s degree, engineering student
Joe Born wondered whether an industrial paint
buffer could smooth out the scratches that had
ruined one of his favorite music CDs. The idea
worked like a charm, and after receiving a patent
on it, Born spent 4 years perfecting SkipDr, an
inexpensive disc-repair kit that he marketed
successfully to Best Buy, Radio Shack, and Wal-Mart.
Born’s new company, Digital Innovations, how sells
50 different products to clean and repair CDs, DVDs,
video games, and office equipment and is worth
about $25 million.
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managing IT
How IT Is Changing the Manager’s Job the massive changes taking place at this almost-century-
IT (that’s an abbreviation for “information technology”) old organization. Mediocre performance throughout the
is changing many things in today’s world.27 On campuses— bank’s branches in seven midwestern states led to new
the “world” you’re most familiar with now—students management being brought in to “shake things up.”
are downloading professors’ lectures to their iPods and One of the changes made by the new management
other MP3 players. Laptops in classrooms are now a com- team was the implementation of electronic manage-
mon sight. Some experts say that this anytime-anywhere ment scorecards designed to track company perfor-
access for students has tangible benefits. Says one IT con- mance, set business-unit goals, stimulate new ideas, and
sultant, “To compete globally, we’re going to have to motivate managers and employees to do better. The
produce a nation of problem-solvers and analytical sales huddles are a way for managers to connect person-
thinkers, and we’re going to have to do it using twenty- ally with employees and keep them focused on meeting
first–century tools.” But IT isn’t just drastically changing the quantitative benchmarks of the scorecards.
the educational world; it’s having a major impact on Electronic scorecards are just one example of ways
businesses and how managers do their job. that managers are using IT to manage their organiza-
At the Springfield, Missouri, branch of Kansas tions more efficiently and effectively. As managers plan,
City–based UMB Bank, employees gather daily in a sales organize, lead, and control, they can look to IT as a tool
huddle and listen to managers dole out a mix of praise to help them collect and use information. Throughout
and exhortation. Although a daily employee meeting the book in these “Managing IT” boxes, we’ll describe
like this may not seem like a big deal, it’s an indicator of many other ways that managers are using IT in their jobs.
take samples of her nail polish to exclusive stores in Los Angeles. They were an instant
hit! Today, the Hard Candy line features over 150 cosmetic products—all the result of
Mohajer’s innovative ideas.
The final important theme in entrepreneurship is growth. Entrepreneurs pursue
growth. They are not content for their organizations to stay small. Entrepreneurs work
very hard to pursue growth as they continually look for trends and to innovate new
Self-Assessment products and new approaches.
Library (S.A.L.) We think an understanding of entrepreneurship is important and have included
I think being an entrepreneur an all-inclusive appendix on entrepreneurship after Chapter 19. In addition, we fea-
might be fun. I wonder if I have
what it takes to be one. ture entrepreneurs in many of our chapter-opening manager dilemmas, end-of-chap-
S.A. L. #I.E.4 will help you see. ter cases, and chapter examples. ( Go to www.prenhall.com/rolls)
Managing in an E-Business World

Do you use e-mail to communicate? Can you find an advertisement that doesn’t have a
Web address in it somewhere? Today’s managers function in an e-business world. In
fact, as a student, your learning may increasingly be taking place in an electronic envi-
ronment. Although some critics questioned the viability of Internet-based companies
(dot-coms) after many went out of business in the early part of this decade, e-business
is here to stay. E-business offers many advantages to organizations—small to large,
profit or not-for-profit, global and domestic, and in all industries.28
E-business (electronic business) is a comprehensive term describing the way an
organization does its work by using electronic (Internet-based) linkages with its key con-
stituencies (employees, managers, customers, clients, suppliers, and partners) in order
to efficiently and effectively achieve its goals. It includes e-commerce, which is essentially
the sales and marketing aspect of e-business.29 Firms such as Dell (computers) and
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entrepreneurship e-business (electronic business) e-commerce (electronic commerce)

The process of starting new businesses, generally in The way an organization does its work by using electronic The sales and marketing of e-business.
response to opportunities. (Internet-based) linkages with its key constituencies in
order to efficiently and effectively achieve its goals
Exhibit 2–9 E-Business Enhanced

Organization
Categories of E-Business
Involvement E-business units within
traditional organization Total E-Business
Organization
Organization’s entire
E-Business Enabled work processes revolve
Organization around e-business model
E-business tools and

applications used
within traditional
organization
Varsitybooks (textbooks) are engaged in e-commerce because they sell items over the
Internet.
Not every organization is, or needs to be, a total e-business. Exhibit 2–9 illustrates
three types of e-business.30 The first type is an e-business enhanced organization, a tra-
ditional organization that sets up e-business capabilities, usually e-commerce, while
maintaining its traditional structure. Many Fortune 500–type organizations have
evolved into e-businesses using this approach. They use the Internet to enhance (not
to replace) their traditional ways of doing business. For instance, the Internet divi-
sion of Sears Holding, a traditional bricks-and-mortar retailer with thousands of phys-
ical stores worldwide, is intended to expand, not replace, the company’s main source
of revenue.
Another category of e-business is an e-business enabled organization that uses the
Internet to perform its traditional business functions better, but not to sell anything.
In other words, the Internet enables organizational members to do their work more
efficiently and effectively. Numerous organizations use electronic linkages to commu-
nicate with employees, customers, or suppliers and to support them with information.
For instance, Levi Strauss uses its Web site to interact with customers, providing them
the latest information about the company and its products, but not to sell the jeans. It
also uses an intranet, a Web-based internal communication system accessible only by
organizational employees.
The last category of e-business involvement is when an organization becomes a
total e-business. Organizations such as Amazon.com, Google, Yahoo!, Blue Nile,
and eBay are total e-business organizations. Their whole existence is based around
the Internet. An interesting management aspect of total e-businesses is that they
can operate their business with a relatively small number of employees. Google,
for example, had over $6.1 billion in sales in 2005 with a little more than 5,600
employees; Amazon.com had over $8.5 billion in sales in 2005 with around 9,000
employees.
Knowledge Management and Learning Organizations

Do you have space for one 30-foot shelf filled from top to bottom with books? That
would be your (and every other person’s) share if all the new information produced in
a single year alone were divided equally worldwide.31 Today’s managers confront an
environment in which knowledge creation and change take place at an unprece-
dented rate. As a result, many past management approaches and principles—created
for a world that was more stable and predictable—no longer apply.
Organizations in the twenty-first century must be able to learn and respond
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quickly. These organizations will be led by managers who can effectively challenge
conventional wisdom, manage the organization’s knowledge base, and make needed
changes. These organizations will need to be learning organizations—that is, ones that
Exhibit 2–10 Traditional Organization Learning Organization
Learning Organization Attitude toward change If it’s working, don’t change it. If you aren’t changing, it
Versus Traditional won’t be working for
Organization long.
Attitude toward new ideas If it wasn’t invented here, If it was invented or
reject it. reinvented here, reject it.
Who’s responsible for Traditional areas such as R&D Everyone in organization
innovation?
Main fear Making mistakes Not learning; not adapting
Competitive advantage Products and service Ability to learn, knowledge
and expertise
Manager’s job Control others Enable others
have developed the capacity to continuously learn, adapt, and change. Exhibit 2–10
clarifies how a learning organization is different from a traditional organization.
Part of a manager’s responsibility is to create learning capabilities throughout
the organization—from lowest level to highest level and in all areas. How? An impor-
tant step is understanding the value of knowledge as an important resource, just like
cash, raw materials, or office equipment. To illustrate the value of knowledge, think
about how you register for college classes. Do you talk to others who have had a cer-
tain professor? Do you listen to their experiences with this individual and make your
decision based on what they have to say (their knowledge about the situation)? If
you do, you’re tapping into the value of knowledge. But in an organization, just rec-
ognizing the value of accumulated knowledge or wisdom isn’t enough. Managers
must deliberately manage that base of knowledge. Knowledge management involves
cultivating a learning culture where organizational members systematically gather
knowledge and share it with others in the organization so as to achieve better per-
formance.32 For instance, accountants and consultants at Ernst & Young, a profes-
sional-services firm, document best practices they have developed, unusual prob-
lems they have dealt with, and other work information. This “knowledge” is then
shared with all employees through computer-based applications and through COIN
(community of interest) teams that meet regularly throughout the company. Many
thinking critically about Ethics

Information is power—those who have information have power. Because information gives
them power, it’s human nature to want to keep that information, not share it. Knowledge
hoarding is a business habit that’s hard to break. In fact, it’s an attitude that still character-
izes many businesses. In a learning organization, however, we’re asking people to share
information.
Getting people to share information may turn out to be one of the key challenges fac-
ing managers. Is it ethical to ask people to share information that they’ve worked hard to
obtain? What if performance evaluations are based on how well individuals do their jobs,
and how well they do their jobs is dependent on the special knowledge that they have? Is
it ethical to ask them to share that information? What ethical implications are inherent in
creating an organizational environment that promotes knowledge sharing?
intranet learning organization knowledge management

A Web-based internal communication system accessible
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An organization that has developed the capacity to Cultivating a learning culture where organizational
only by organizational employees. continuously learn, adapt, and change. members systematically gather knowledge and share it
with others in the organization so as to achieve better
performance.
✓ In other classes you take, see what ideas and concepts potentially relate to being a
good manager.
✓ Pay attention to current business stories and how they relate to any of the six
approaches to management.
✓ If you’re working, try to note how many of the six approaches to management you’re
using and how they’re helping you do your job.
✓ As you make decisions, resolve problems, or just live your daily life, see if any of the
six approaches to management might help you be more effective or efficient.
✓ Stay informed about the current trends and issues facing managers.
Self-Assessment ✓ Complete any of these exercises from the Self-Assessment Library found on
Library (S.A.L.) www.prenhall.com/rolls: S.A.L. #I.E.4—Am I Likely to Become an Entrepreneur?, S.A.L.
#I.B.4—What Are My Attitudes Toward Workplace Diversity?, or S.A.L. #III.C.1—How
Well Do I Respond to Turbulent Change?
other organizations—such as General Electric, Toyota, Hewlett-Packard, and

Buckman Laboratories—have recognized the importance of knowledge manage-
ment to being a learning organization.
Quality Management
A quality revolution swept through both the business and public sectors during the
1980s and 1990s.33 The generic term used to describe this revolution was total quality
management, or TQM, for short. It was inspired by a small group of quality experts, the
most famous of whom were W. Edwards Deming and Joseph M. Juran. The ideas and
techniques espoused by these two men in the 1950s had few supporters in the United
States but were enthusiastically embraced by Japanese organizations. As Japanese manu-
facturers began beating out U.S. competitors in quality comparisons, Western man-
agers soon took a more serious look at TQM. Deming’s and Juran’s ideas became the
basis for today’s quality management programs.
Quality management is a philosophy of management involving continual improve-
ment and responding to customer needs and expectations (see Exhibit 2–11). The
term customer has expanded beyond the original definition of the purchaser outside
the organization to include anyone who interacts with the organization’s product or
services internally or externally. It encompasses employees and suppliers as well as the
people who purchase the organization’s goods or services. The objective of quality
management is to create an organization committed to continuous improvement in
work processes.
Quality management is a departure from earlier management theories that
were based on the belief that low costs were the only road to increased productiv-
ity. The U.S. car industry is often used as a classic example of what can go wrong
when managers focus solely on trying to keep costs down. In the late 1970s,
General Motors (GM), Ford, and Chrysler built products that many consumers
rejected. Your second author vividly remembers purchasing a new Pontiac Grand
Prix in 1978, driving it off the lot, pulling up to a gas pump, filling the gas tank,
and watching gas pour out onto the ground because of a hole in the car’s gas
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tank! When you consider the costs of rejects, repairing shoddy work, product
recalls, and expensive controls to identify quality problems, U.S. manufacturers
actually were less productive than many foreign competitors. The Japanese
Exhibit 2–11 1. Intense focus on the customer. The customer includes not only outsiders who buy the
organization’s products or services but also internal customers who interact with and
What Is Quality serve others in the organization.
Management?
2. Concern for continual improvement. Quality management is a commitment to never
being satisfied. “Very good” is not good enough. Quality can always be improved.
3. Process-focused. Quality management focuses on work processes as the quality of goods
and services is continually improved.
4. Improvement in the quality of everything the organization does. Quality management
uses a very broad definition of quality. It relates not only to the final product but also to
how the organization handles deliveries, how rapidly it responds to complaints, how
politely the phones are answered, and the like.
5. Accurate measurement. Quality management uses statistical techniques to measure every
critical variable in the organization’s operations. These are compared against standards or
benchmarks to identify problems, trace them to their roots, and eliminate their causes.
6. Empowerment of employees. Quality management involves the people on the line in the
improvement process. Teams are widely used in quality management programs as
empowerment vehicles for finding and solving problems.
demonstrated that it was possible for the highest-quality manufacturers to be

among the lowest-cost producers. American manufacturers in many industries
have now realized the importance of quality management and implemented
many of its basic components. Because quality management is important, we’ll
discuss it throughout this book.
• Explain why we need to look at the current trends • Describe the current trends and issues facing
and issues facing managers. managers.
The breakthrough design of the breathable

Geox shoe includes a sole punctuated with
many tiny holes to let perspiration escape.
The company, based in Italy, prides itself on
maintaining its own research laboratory
where white-coated engineers test shoe
designs to ensure their quality. Company
president Mario Moretti Polegato says of
fashion: “It’s not sufficient anymore. We want
people to think technology and fashion to
improve as many lives as possible. It’s our
mission.”
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quality management
A philosophy of management that is driven by continual
improvement and responding to customer needs and
expectations.
Dana Murray
Vice President of Facilities and Marketing, Bookmans,
Tucson, AZ
E
very organization needs to be innovative, but I think it would
be particularly critical in the industry Nike is in. Here are some
things that John Hoke may suggest that other company managers do if they
wanted to encourage innovative thinking:
• Think outside of the box.

• Brainstorm.
• Don’t discount any ideas that employees might have.
• Get out of the office.
• Look at other industries.
• Create a budget to allow for innovative thinking.
• Try things.
• Allow mistakes.
Jennifer Robbins
Director, Technical Design, Tommy Hilfiger, New York, NY
E
ncouraging innovative thinking in all areas of a company is
critical in this competitive global market. The challenge
becomes helping employees become more creative. John
may suggest that other company managers can do this by:
• Going outside of the footwear industry. Have them study other industries (arts,
history, education, banking, media, etc.) for components or ideas that could be
applied to their industry.
• Going against the prevailing wisdom. By not following the crowd, other oppor-
tunities and possibilities may be seen. They should ask “why” and “how” more
frequently.
• Seeking opinions from other people who have no experience or background in
this industry. How do they see your product or work flow? What questions do
they ask? What do they wonder about?
• Having new experiences. Encourage employees to go to a movie or read a
book from a different genre than they normally prefer. Shop in stores they’ve
never been in before. New experiences can germinate new ideas.
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What Does History Tell Us About Management?

Organized endeavors have existed for thousands of years
• Examples: the Pyramids and the Arsenal of Venice
Two important historical events:
• Adam Smith’s Wealth of Nations
• The Industrial Revolution
What Is Scientific Management?

• Using scientific method to find “one best way” to do a job
• Important contributors: Frederick W. Taylor (four scientific principles; pig iron experiment); Frank and
Lillian Gilbreth (time and motion study; therbligs)
• Still used today to improve efficiency
What Is General Administrative Theory?

• Focuses on managers and what good management practice is
• Important contributors: Fayol (14 principles of management) and Max Weber (bureaucracy)
• Still used today as part of many current management concepts
What Is the Quantitative Approach?

• Using quantitative techniques to improve decision making; also known as operations research, and man-
agement science
• Involves application of statistics, optimization models, information models, and computer simulations
• Still used today, especially in planning and control
What Is the Behavioral Approach to Management?

Organizational behavior is the study of people at work
• Early advocates (Owen, Munsterberg, Follett, and Barnard)
• Hawthorne Studies were most important contribution; started as scientific management experiment
and went through several phases including illumination phase and group studies
• Led to new emphasis on human behavior factor in management
• Behavioral approach has largely shaped how today’s organizations are managed
What Is the Systems Approach?

Viewed organizations as open systems made up of interdependent factors that must work together
What Is the Contingency Approach?

No universally applicable management rules that would work in all situations
• It all depends: “if, then”
What Are the Current Trends and Issues Impacting Today’s History?
Globalization, ethics, workforce diversity, entrepreneurship, e-business (enhanced, enabled, total), knowl-
edge management, learning organizations, quality management
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Management: By the Numbers

• A recent poll said that 47 percent of surveyed indi- • Eighty-three percent of executives surveyed by the
viduals from age 18 to age 29 were excited when ASQ (American Society for Quality; www.asq.org)
using new technology devices. were familiar with total quality management, and
• Fifty-seven percent of respondents to a survey 92 percent of these executives believed that qual-
about e-commerce said they pay at least one bill ity techniques provide a positive return to organi-
electronically. zations.
• Twenty-nine percent of teenagers in a Junior
Achievement survey said that a person has to Sources: L. Lyons, “Americans Embrace High-Tech Products,” The
“bend the rules to succeed” in business. Gallup Poll, poll.gallup.com, December 27, 2005; WorkUSA 2004,
Watson Wyatt Worldwide: Washington, DC, 2004; “The Stat,”
• Most employees (72 percent) believe that their BusinessWeek, September 20, 2004, p. 16; G. Weiler, “What Do CEOs
immediate bosses behave with honesty and Think About Quality?” Quality Progress, May 2004, pp. 52–56; and J.
integrity. Edwards, “The New New Economy,” CFO, January 2004, p. 19.
Thinking About Management Issues

1. What kind of workplace would Henri Fayol create? 4. “Entrepreneurship is only for small, start-up busi-
How about Mary Parker Follett? How about Frederick nesses.” Do you agree or disagree with this state-
W. Taylor? ment? Explain.
2. Can a mathematical (quantitative) technique help a 5. How do societal trends influence the practice of man-
manager solve a “people” problem such as how to agement? What are the implications for someone
motivate employees or how to distribute work equi- studying management?
tably? Explain.
6. Would you feel more comfortable in a learning orga-
3. Is globalization an issue for e-businesses? Explain. nization or in a traditional organization? Why?
Working Together: Team-Based Exercise

Building a base of knowledge that others in an organiza- unique tasks do they perform from which others might
tion can tap into and use to help do their jobs better is a learn something? After discussing these issues, come up
bottom-line goal of knowledge management. Form with an outline of major areas of important knowledge
groups of three or four class members. Your task is to do for this organization. (Here are a couple of hints that
some preliminary work on creating a knowledge base for might help you get started: using technology in class-
your college. Think about what organizational members rooms, keeping in touch with former students and
could learn from each other in this organization. What alumni.) As a group, be prepared to share your outline
common tasks might they perform that they could learn with the class and to explain your choices.
from each other about how best to do those tasks? What
Case Application
Threads of History to make some changes in order to remain competitive.
Springs Industries of Fort Mill, South Carolina, has done These changes entailed becoming a more efficient opera-
something that many organizations can only hope to do. tion by streamlining the company’s work processes and
Founded in 1887, it’s survived for well over a century in an cutting domestic production. Although she struggled with
industry that’s seen its share of brutal ups and downs. As the tough decision of manufacturing outside the United
the largest home-furnishings company in North America, States and being assumed to care more about profits than
Springs’ 14,000 associates (employees) make bath rugs, people, Bowles says, “How many jobs can we have if we
bedspreads, pillows, towels, window blinds, and other don’t make a profit? If retailers will only sell goods made
textile products at manufacturing facilities in 13 states, here and consumers will only buy products made here, I’ll
Canada, and Mexico. The company’s CEO, Crandall Close reopen all my plants here. I’d love to do that. But that just
Bowles, is the great-great-granddaughter of the com- isn’t going to happen.” Choosing not to totally rely on
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pany’s founders. When she became CEO in 1998, the U.S. outsourced manufacturing, Bowles is using an approach
textile industry was under intense attack by competition called mirror manufacturing, in which much of the com-
from cheap imports. Bowles realized that she would have pany’s product line is duplicated domestically. That way, if
for her consistently outstanding daily performance.

Ogburn’s department manager said, “Nancy’s quality,
safety, productivity, and attendance records set the bar at
the Elliott Plant and are among the best in the company.”
When presenting the award to Ogburn, CEO Bowles said,
“. . . she embodies what this program is all about—going
the extra mile. It’s because of associates like her that
we’ve survived 117 years, why we’re at the top of our
industry, and why we have a future.” Surviving another
century won’t be easy, but this company has realized that
although its past is important, its current decisions and
actions will influence whether there’s a future.
DISCUSSION QUESTIONS
Springs Industries CEO Crandall Close Bowles.
1. How might principles of scientific management be
useful to Springs Industries? How about the quanti-
tative approach?
a customer needs product quickly to meet a spike in 2. How might knowledge of organizational behavior
demand or if a product starts to sell more than forecasted, help the company’s frontline supervisors manage
there won’t be a 90-day wait for product to be shipped their employees? Would the CEO and other top man-
from suppliers. Instead, the company’s U.S. plants can ship agers need to understand OB? Why or why not?
in a matter of days.
CEO Bowles continues to manage her company for 3. Using Exhibit 2–6, describe Springs Industries as a
the long term. However, she says one of her biggest chal- system.
lenges is to “motivate and reassure the employees that
4. Using information from the company’s Web site,
this company does have a future and we can grow and
what values does this company embrace that might
prosper.” One way that the company has chosen to do
be important for successful organizations in the
this is through its Rewards and Recognition program,
twenty-first century?
which highlights and compensates outstanding associ-
ates. Associates from nearly every facility are nominated
and one individual is chosen as the Corporate Associate Sources: Information from company Web site, www.springs.com,
of the Year. In 2004, Nancy Ogburn, a weaver at the January 3, 2006; and M. Newsome, “By a Thread, “ Times Inside
Elliott Plant in Lancaster, South Carolina, won the award Business, August 2005, p. A20,
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QXD 9/1/06 1:49 PM Page 26

General Administrative Theory

Toward Understanding Organizational Behavior

The Systems Approach

The Contingency Approach

Current Trends and Issues

28 Part One Introduction

HISTORICAL BACKGROUND OF MANAGEMENT

Chapter Two Management Yesterday and Today 29

Exhibit 2–1 Development of Major Management Theories

Early Examples Early

Adam Smith Hawthorne

division of labor (or job specialization) industrial revolution

30 Part One Introduction

Frederick W. Taylor (1856–1915) was the father of scientific

Chapter Two Management Yesterday and Today 31

combinations of procedures, techniques, and tools, Taylor succeeded in getting that

Frank and Lillian Gilbreth, parents of 12

32 Part One Introduction

How Do Today’s Managers Use Scientific Management?

GENERAL ADMINISTRATIVE THEORY

Henri Fayol We introduced Fayol in Chapter 1 because he identified five functions

and relations.8 Weber described an ideal type of organization he called a

Chapter Two Management Yesterday and Today 33

How Do Today’s Managers Use General

therbligs principles of management bureaucracy

general administrative theory

34 Part One Introduction

Exhibit 2–4 Weber’s Ideal Bureaucracy

contemporary managers feel that bureaucracy’s emphasis on strict division of labor,

QUANTITATIVE APPROACH TO MANAGEMENT

Chapter Two Management Yesterday and Today 35

How Do Today’s Managers Use the Quantitative Approach?

After Marla (right) and Bonnie Schaefer,

36 Part One Introduction

TOWARD UNDERSTANDING ORGANIZATIONAL BEHAVIOR

Exhibit 2–5 Early Advocates of OB

• Concerned about deplorable

Chester Barnard Early Advocates Hugo Munsterberg

Mary Parker Follett

• One of the first to recognize that

Proposed more people-oriented

Chapter Two Management Yesterday and Today 37

The Hawthorne Studies

How Do Today’s Managers Use the Behavioral Approach?

organizational behavior (OB) Hawthorne Studies

38 Part One Introduction

THE SYSTEMS APPROACH

The Systems Approach and Managers

Exhibit 2–6 Environment

Raw Materials Employees’ Work Products and Services

Chapter Two Management Yesterday and Today 39

THE CONTINGENCY APPROACH

The Contingency Approach and Managers

system open systems contingency approach

closed systems require different ways of managing.

40 Part One Introduction

CURRENT TRENDS AND ISSUES

COPING WITH ANTICAPITALIST BACKLASH. Capitalism’s emphasis on profits, efficiency,

Chapter Two Management Yesterday and Today 41

Textile workers in Italy are facing some of the

MOVEMENT OF JOBS TO COUNTRIES WITH LOW-COST LABOR. Globalization means busi-