58 Module 2 The Management of People The Functions and Theories of LEARNING OBJECTIVES: ‘At the end of this chapter students should be able '@ Discuss the need for and nature of organisations = Evaluate the major management theories Outline the contribution of each theory on present-day organisations m= Explain the functions of management ‘m Discuss the effect that each function has on the ‘organisation 'mAssess the main roles of management in an organisation The need for and nature of organisations mply put, an organisation is @ group of people S wing tte aceve a common oct goal. Organisations work to transform inputs (people, raw materials, money, etc.) into outputs which are of greater value than the inputs used. In Module 1, we discussed the different types of organisations that exist in both the private and public sectors. It was pointed out that, because of scarcity and out of choice, humans must make decisions regarding ‘what to produce, how to produce and for whom to produce, Therefore there is a need for organisations that will convert inputs into outputs. Each organisation may be different in many ways. This, difference is sometimes caused by the management theory that is being utilised. The next section will outline the main tenets of these theories while discussing their impact on modern-day organisations. 2 The major management theories The classical theories ‘This form of management theory dates from as far back as the Industrial Revolution when it was adopted to deal with the new problems that had emerged. Managers found it difficult at the time to train employees and decrease dissatisfaction. This led to the development of classical theories as they tied to find a proper solution, The work of three main classical Management theorists will be discussed in this section, namely Frederick ‘Taylor, Henri Fayol and Max Weber. Scientific Management: Frederick W’ Taylor (1856-1915) Frederick Tayloris usually regarded as the father of Scientific ‘Management. During the time of the development of this theory most managers had little contact with the activities of the factory. Instead, foremen were given full control to produce the goods that were in demand, Workers would ‘generally use the available tools and developed methods that fitted their style of work. This had become counterproductive ‘and inefficient, and workers were often dissatisfied. The existing situation sparked the interest of Taylor, who wanted to improve productivity and reduce inefficiencies in the US manufacturing sector. He started his study at Midvale Steel Company and found out that there was confusion between management and workers on what constituted ‘a day's work’, He cartied ‘out numerous experiments, called work studies, in order to determine the best way to perform a job. Taylor viewed man as an ‘economic animal’, meaning that he was rational and made economic choices based on the monetary or material reward to be gained. This view of the economic man led him to develop payment systems which linked efforts with the rewards received. This was done using a piece rate system. Taylor’s study outlined ways in which managers could use the principles of his theory to improve productivity. His theory suggested that work should be broken down into smaller components or tasks to enable workers to specialise and become competent at those tasks. Taylor outlined four principles of Scientific Management: Develop a scientific study of management, with stated rules, laws and principles to replace the outdated ‘rule of thumb’ methods ‘Workers should be selected scientifically, trained and developed as opposed to past practices where they were selected randomly and usually untrained Cooperate with workers in order to ensure that work is done in accordance with the prescribed scientific principlesThere should be an equal division of tasks and responsibilities between managers and work, ers. This will alow managers to apply Scientific Mana, principles in planning the work that will be perform by the workers. formed For the most part, these principles had some level of success. According to research done, they were implemented in many factories and would often increase overall productivity. In addition to his four principles of management, Taylor used the following elements of Scientific Management to manage his staff effectively: = The separation of planning from the actual performance of the task Carefully selecting workers to carry out a task on a scientific basis 1 Closely observing workers doing the task, and documenting findings = Carrying out job analysis to ascertain the best way of ‘completing a task a Standardisation of the process involved in carrying out the task based on the job analysis i Assigning foremen to supervise workers, based on specialisation of functions Fostering a suitable environment to encourage cooperation between management and workers 1s Providing financial incentives to motivate workers and pay them based on performance. This theory enjoyed the following successes: 1 Factories that implemented his approach benefited from increased productivity Some organisations benefited from increased profits 1 His theory led to the development of fields such as industrial engineering, personnel and quality control Some drawbacks of Taylor’s theory are: 1 Identifying the ‘best way’ to do a job often made the task monotonous, dampening autonomy and skill variety © Some people were opposed to assess the work done in a day © His view of the economic man was because humans were likened to machines ans only be satisfied by money. the use of stopwatches to heavily criticised \d would Administrative Management: Henri Fayol (1841-1928) an Henri Fayol is also a classical theorist and is Feet as the “father of modern management His tne0t Administrative Management i er es same time as Taylor's but he did mot focus of UN RN Instead, he focused on management from the UP We dees CHAPTERS THE FUNCTIONS AND THEORIES OF MANAGEMENT | 59 of administration, He concluded that business activities are divided into six interdependent groups which managers should coordinate so as to achieve the organisation's goals: Technical - including manufacturing, production and adaptation Commercial - including buying and selling Financial - sourcing and utilising capital Security - extending to both property and individuals Accounting — inventory, final accounts and statistics ‘Managerial - including his five functions of ‘management, which are discussed below. Fayol’s five functions of management are outlined as follows: = Planning — involves the establishment of objectives and development of strategies to achieve them. Managers should also be able to anticipate future events and plan. accordingly Organising this deals with the delegation of responsibilities to subordinates in order to get the job done = Commanding ~ giving clear instructions to workers and ‘ensuring that the business is operated effectively ® Coordinating - the manager should ensure that all groups within the organisation are working toward a ‘common goal = Controlling ~ ensuring that activities are being done according to plan. The manager monitors the performance of the staff against the prescribed rules and procedures. Incidentally, some of the functions Fayol proposed became well known and accepted as the main functions of ‘management. These will be discussed in more detail later in the chapter. In addition to the five functions of management, Fayol outlined 14 principles of management which should help the manager to run a business smoothly. These are: m= Division of labour - work should be divided into smaller tasks to promote specialisation, This should increase efficiency, productivity and output Authority and responsibility ~ managers should be given the authority and autonomy to carry out their responsibilities 5 Discipline ~ all levels of managers should be disciplined in order to accomplish their tasks. Discipline will help them to develop obedience, diligence, energy and respect for all = Unity of command - in order to prevent confusion, subordinates should take command from and report to only one supervisor0) | Bn STONE LTTHE MANAGEMENT OF PEOPLE Unity of direction - activities of the same nature should be supervised by one manager who will guide subordinates to achieve the same objective Subordination of individual interest to general interest ~ the interest of an individual or group should not Override the interest of the enterprise as a whole = Remuneration - workers should receive fair payment for work done © Centralisation — this deals with the way in which, decisions are made. The degree of centralisation in decision making should be based on the circumstances being faced by the organisation Scalar chain — there should be a clear line of authority from the highest to the lowest level in the organisation. In other words, there should be an organisational hierarchy with a manageable span of control = Order —all resources (people, raw material, tools, equipment, etc.) in the organisation should be carefully and properly ordered to ensure efficiency m Equity - employees should be treated fairly and justly. Managers should not discriminate but be kind, honest and impartial to every employee © Stability of tenure of personnel - labour turnover rate is an indication of the effectiveness of management. This rate should be minimised so that each employee can ‘grow and propel the organisation towards achieving its goals 1m Initiative — workers should be encouraged to generate ideas and develop plans that will benefit the organisation. This will also help the employees to develop their personal skills and abilities Esprit de corps ~ this means a ‘spirit of cooperation’. Employees and managers should develop good team. spirit and morale. Unity and harmony should be promoted in order to strengthen the organisation, Fayol's 14 principles of management are still being used in some organisations today. They guide managers on how to supervise subordinates and organise their departments or firms. Bureaucratic Management: Max Weber (1864-1920) Bureaucratic Management was developed by Max Weber, a German sociologist. His work focused mainly on how the organisation was structured rather than the practical problems of management proposed by Taylor and Fayol. Having viewed and analysed the growth of large-scale organisations, Weber developed a set of principles for what “an ideal bureaucracy’ ther than tradition or charisma. This legal authority ral the organisation, ‘encompasses rules and controls that govern the mandate to He believed that managers were given { enforce these rules and controls based upon the authority given to them by the office in which they serve. Im his study, Weber pointed out that bureaucracy had become inevitable because of the growth of businesses, advancement in technology and modem legal demand. This concept of bureaucracy is evident in governments, businesses, trade unions, churches and even voluntary associations. Weber developed six characteristics of bureaucracy: = Division of labour — this will lead to an increase in efficiency due to specialisation. By dividing labour, authority and responsibility will be clearly defined = Authority hierarchy — the chain of command should be dearly outlined from the top to bottom in the organisation. Each employee must be aware of the person to whom he reports. Likewise, a manager must be aware of the people for whom he is responsible = Formal selection - employees should be hired based on their qualifications, education and training Career orientation ~ managers were seen as professionals instead of just owners of units they ‘managed. As a result, they were expected to pursue ‘careers’ in their respective fields m= Formal rules and controls — the organisation has formal rules and controls which must be adhered to by employees in the performance of their duties @ Impersonality ~ rules and controls were applied impersonally and uniformly across the organisation. Weber's theory of bureaucracy faced criticisms, some of which are outlined below: = The constant dependence on rules and controls may impede the organisation’s ability to change to meet the changing environment The delegation of authority may lead to subdivisions within the business, with people focusing on the objectives of the unit rather than the business as a whole = Rules and controls may become tedious over time and lead to inefficiencies rather than the efficient running of the business. Table 5.1 sets out the various contributions of classical management theories to the running of modern organisations.CHAPTERS THE FUNCTIONS AND THEORIES OF MANAGEMENT 61 i ‘scientific = Some firms stil hola Management | ‘Best practices’ are pron’), 28 the only motivator i . Ufartmiod. | Thesdecton gueprometed ago hay tnd of sn her wens ha coon Sin a number of o vdone witha person is empl rganisation: Sear a emeloyed ‘sanisations is done with stringent procedures to ensure that the best Is bractsed Workers, especialy in the oa) MPIC i very siniar Fits tin cially inthe manufactur ana 2att 1 Fayol’s five functio to Taylor's observation and documentation of worker dl Construction sector are sil being closely supervised by foremen reat emphasis on efciency and profit maxamicaion ‘administrative Management (Henri Fayol) Faye orp in many fr’ organisational charts. The chain of command is stil The principle of initiative is pursued by Brojects and workin teams to impron Bureaucratic |m The theory of bureaucracy is being ux Management /m The hierarchical structure pronsoea y Many of today’s firms as workers are given the autonomy to develop business activities and performance bievie | te ein coma and tc yeahs by Weber s widely used today as manages and subordinates are laren Irganisations and insti rey aie san institutions Guttne rules and regulations to moritor the activites that goon inthe business ba an ie necessary if in order idere ‘able 5.1: Contributions of classical theories to modern organisations Sd coat ‘Old school’ management at OSM Ltd When Mir Grumpy took over the reins at OSM Ltd the staff were optimistic that a big change would be coming and a new style of management would emerge. However, reality set in as soon as Mr Grumpy became settled. Employees quickly realised that while his was a new face, his management style was old. Being a steward of a deeply entrenched classical leader, Mr Grumpy has approached this job with the same traits. Since his arrival he has implemented hectic training programmes, workers are given guidelines on how work is expected to be done and payment is now being made based on performance. In addition to those changes, workers feel as though they are being closely monitored and that there are too many supervisors. re becoming restive and the other managers are now looking at ways in which they can improve the manage- The workers ai 4 proach to management in a bid ment of the firm. Some of them are thinking of using either Henri Fayol’s or Max Weber's apy to change the way things are done. Questions, 7 1. Which of the classical theories is being used at OSM Ltd? Give at least two 2) pieces of evidence from the case (5 marks) 2 Looking at the circumstances, is this the best approach to be implemented? Explain your answer. 4 rar . 7 ; i ; marks 3. Briefly describe the principles of the two (2) other theories that were ieee in the case. (omar) . wve for the firm at this time. 4. Discuss whether or not these approaches are the best mo Total 25 marks i ‘their view was that management needs to focus on it of behavioural theories in science or techniques, as purported by eae | theories were suecessul pare ai bape ‘These theorists, led by Elton Mayo, By the 1920s, while the classical *evsolutions 10 E dlassical theorists. , ai other scientists started to look for othe 4g the Human studied the reaction of employees to performance ince ‘management problems. Together they fOME, TT schemes, job satisfaction and working condos. Ter Relations School (Behaviour concluded that if managers attempt to understant focused specifically on the human ‘Management Thi side of management.62 | MODULE ZT UNIT 1 ITHE MANAGEMENT OF PEOPLE Employees’ behaviour beter, they can improve productivity. This school got its “kick start’ from a major study caried out at the Western Electric Company's (WEC) Hawthorne plant ‘in Chicago between 1924 and 1932, ‘The Harethorne Study: Elton Mayo This study was spearheaded by Elton Mayo, a Harvard University professor. The main purpose of the re was to determine the effect of working con Productivity. The study started out by trying to determine the relationship between lighting in the work area and employee productivity. The initial experiment heeded no positive result and so Mayo and a colleague (Fitz J Roethlisberger) were hired to find other variables. The new experiment focused ona Relay Assembly Test Room where they studied a group of female employees. The women were allowed to supervise themselves, enjoy less control and form groups. The theorists soon found out that these privileges boosted the workers’ morale, They were no longer thinking that they were a small part of the organisation and that they were not needed ‘as much as others. This led to an improvement in output as the women had become mote motivated to do the work. This study changed the views of many stakeholders of the day and improved their knowledge and understanding. ‘The study's findings outlined the following views: = Workers are not motivated only by money but also by social and personal factors m= Management should analyse employees’ attitudes when trying to ascertain their behaviour = Effective supervision helps to maintain employees’ morale and productivity More emphasis should be placed on informal groups and they may have a significant impact on employees’ performance. ‘The Human Relations School consisted of other theorists ‘who brought forward ideas such as: m= Maslow (Hierarchy of Needs) m= McGregor (Theory X and tee Theory Y) m= Herzberg (Iwo Factor Theory). These theories willbe further examined and discussed ‘under ‘Motivation’ later in the module. The following methods of motivation were proposed by the Human Relations School: Figure 5.1: A basie system Job enlargement - workers are given more a one task to perform at the same level of skill ar responsibility i | ‘& Job enrichment - the workers’ tasks are improved upon to make them more interesting and satisfying. Workers are also given more responsibility and recognition = Job rotation - workers get the chance to work in different positions throughout the business, doing different tasks before being moved to another task = Group working — this involves placing workers in groups to complete a given task. ‘Some criticisms of this theory are: = Humans are complex and so predicting behaviour may be more difficult than presented There are other factors outside of motivation that affect workers’ performance ‘= The Human Relations School was criticised for playing down the conflict of interest between management and employees. The system management approach ‘The system approach is @ modem form of management. It focuses on the organisation as a system that transforms {inputs into outputs. A system is a set of interdependent parts (subsystems) that relate to each other in the accomplishment of a purpose or task. The system theory sees the organisation. as having four components or elements: = Inputs ~ people, materials, money or information Transformation ~ includes managerial or technological processes = Output the goods and services that are produced '= Feedback ~ includes the possible reactions from the environment in which the firm operates, for example from consumers or clients, External environment, Goods and services‘Amodel ofa basic system is shown this, itis clear that the process cae pane 5.1. Based on. outputs is continuous. The organisation | panstormation and produces products that can be exchanged for na hatit (profits) needed to obtain new inputs and ge enous survival in the market. to maintain its system theoristsbelieve that businesse: in terms of the interaction of their basic ‘components could lead to an improvem performance. However, in order to re: are required to manage the interaction rather than their independent actions. A: approach suggested that management integrates its major functions of planning, organising, staffing leading. humsse resource management and controlling, The system approach stated that most organisations (systems) depend on other systems for their inputs and sell their outputs to other systems (consumers). ‘These organisations are affected by market forces within their environment, along with societal values, legislation, shareholders’ demands and so on. ‘The system approach is concerned with some key concepts which give a clear picture of how a system works. First, a system is divided into two categories: = Closed system — which is one that has very little or no interaction with its external environment Open system — which is one that has interaction with its external environment. Another set of concepts important to the system theory ate: Synergy - this occurs where the total output of the system is greater than the sum of all of its inputs. However, for synergy to occur, each subsystem may have to sacrifice its optimisation for the success of the whole system. In terms of the business, each department should not aim solely at achieving its own objectives but instead work together to achieve the ; overall objectives of the firm. Therefore the production department cannot work without the input of, say, marketing or finance if the business is to be successful. Synergy is therefore associated with an open system Entropy — this refers to the tendency of systems, especially where they are not properly maintained, to run down and die. The concept of entropy is closely associated with closed systems because of the oe i x interaction with the external environment. 7 ite a interaction results in no possibility for a P energy and so the system will eventually die are Subsystems ~ as was alluded to earlier, ee the individual parts of the entire system am 'sshouldbeanalysed components, These ‘ent in the business's, ‘alise this, managers of each component S a result, the system cn, APTER5 THE FUNCTIONS AND THEORIES OF MawaceMent | 63 interdependent. Management must realise that a change to any of these subsystems will result in a change in the entire system. As a result, the firm must not be managed as having separate parts but as one unit. Contingency theory After analysing the existing management theories, in the late 1950s Joan Woodward and other theorists developed the contingency theory. These theorists believed that there Was no ‘one best way’ to carry out a task. Instead, its main approach is one of “it all depends’. The theory stipulates that each situation is affected by different factors and must be treated on its own merit. With this in mind, the contingency approach is flexible and draws on the concepts of all previous theories in solving a problem. It integrates the findings of all theories in an attempt to deal with each situation. The effectiveness of such action depends on the size of the organisation, history, the environment and the techniques used, among other factors. The main ideas of the contingency approach are summarised as follows: mA universal or ‘one best way’ to manage does not exist The organisation should ensure that there is coordination between its design and subsystems and the environment in which it operates For the organisation to be effective, its subsystems must be in syne Si stesdinaiiiieaheeennadl It gave insights to businesses on motivation and group dynamics which are still practised today The recognition of employees as valuable resources has changed the view that they are economic animals and tools The concepts of this theory are being widely used in a number of organisations that practise teamwork. Departments are no longer isolated but are making ‘their contributions to the development of certain projects : Organisations have placed more emphasis on all stakeholders. As a result, firms are signing quality assurance deals with their suppliers, are becoming more aware of the needs of their customers and are becoming increasingly socially responsible In reality there is no one way of doing things, therefore this theory is synonymous with the approach that many organisations have taken in employing aspects of the different theories in management Human Rela- tions School ‘system theory | @ Contingency |= theory ‘ontributions of madern theories to modern organisations