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Chapter

2
1
The Evolution of
Management Thought
Overview

The need to increase efficiency and


effectiveness has driven the evolution of
management theory

Job specialization, the division of labor and


the study of how people do things is central to
the pursuit of increased efficiency

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Overview

 Theories about the best ways to


motivate and control employees
have evolved
 The study of the external
environment’s impact on an
organization has become a central
issue in management thought
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Evolution of Management Theory
1890 1920 1940 1970 2000
*Scientific Management
*Administrative Management
*Behavioral Management
*Management Science
*Organizational
Environment
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Job Specialization and
the Division of Labor

Adam Smith (18th century economist)


• Observed that firms manufactured
pins in one of two different ways:
- Craft-style—each worker did all
steps.
- Production—each worker
specialized in one step.
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Job Specialization and
the Division of Labor
Smith realized that:
• Breaking the total job down into steps
allowed workers to become very skilled
at specific tasks, increasing
productivity

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F.W. Taylor and Scientific
Management
Scientific Management
The systematic study of the
relationships between people and
tasks in order to redesign the work
process for higher efficiency.
TAKE THE WATCH APART AND
REASSEMBLE IT DIFFERENTLY TO
MAKE IT TICK FASTER.
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Scientific Management
Defined and popularized by Taylor
in the early 1900’s.
Sought to reduce the time a worker

spent on each task by optimizing


the way the task was done.
Focused on the process.

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Four Principles of Scientific
Management
1) Study the ways jobs are performed
and determine new ways to do them.
Gather detailed time and motion

information.
Try different methods to see which is

best.

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Four Principles of Scientific
Management
2) Codify the new methods into
rules and teach all workers
the new method.

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Four Principles of Scientific
Management
3) Determine who’s skills best match the
rules.
4) Establish fair levels of performance; pay
a premium for higher performance.
 Note: all still done by Toyota today but
improvement process (kaizen) in
hands of employees, not managers –
you will see why this point is
important
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Problems with Scientific
Management
 Specialized jobs became boring and dull.
 Managers frequently did not reward workers for
increased output, so workers purposely
‘underperformed.”
 Management used conveyors belts to force a specific
work pace, making workers depersonalized cogs in a
machine.
 Unions rose to negotiate work rules.

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Administrative Management Theory

Administrative Management
• The study of how to create an
organizational structure that leads
to high efficiency
and effectiveness.

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Administrative Management Theory
Max Weber
• Developed the concept of bureaucracy as a
formal system of organization and
administration designed to ensure
efficiency and effectiveness.

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Weber’s Principles of Bureaucracy
1) A manager’s formal authority derives
from the position he holds in the
organization.
2) Position should be based on
performance, not social standing or
personal contacts.

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Weber’s Principles of Bureaucracy

3) The extent of each position’s formal


responsibilities and it’s relationship
to other positions should be clearly
specified.
4) Authority can be exercised
effectively when positions are
arranged hierarchically (the many-
layered cake).
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Weber’s Principles of Bureaucracy
5) Managers must create a well-defined system of
rules, operating procedures, and norms so that
workers know what is expected and managers
can effectively control behavior.

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Rules, SOPs and Norms
 Rules – formal written instructions that
specify actions to be taken under different
circumstances
 Standard Operating Procedures (SOPs) –
specific sets of written instructions about how
to perform a certain aspect of a task
 Norms – unwritten, informal codes of
conduct that prescribe how people should
act in particular situations – IBM dress code
in the 70s.
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Fayol’s Principles of Management
 Division of Labor: allows for job specialization.
• jobs can have too much specialization leading to
poor quality and worker dissatisfaction.
 Authority and Responsibility
• both formal and informal authority resulting from
special expertise.
 Unity of Command
• Employees should have only one boss. If not,
chaos and confusion.
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Fayol’s Principles of Management
Line of Authority
• A clear chain of command from top to
bottom of the firm.
Centralization

• The degree to which authority rests at the


top of the organization.
Unity of Direction

• A single plan of action to guide the


organization.
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Fayol’s Principles of Management
Equity - The provision of justice and the fair
and impartial treatment of all employees.
Order - The arrangement of employees in
order to optimize value for the organization
and provide career opportunities.
Initiative - The fostering of creativity and
innovation by encouraging employees to act
on their own.
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Fayol’s Principles of Management
Discipline

• Obedient, applied, respectful employees


are necessary for the organization to
function.
Equitable Remuneration of Personnel

• An equitable and uniform payment system


that motivates employees to contribute to
organizational success.
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Fayol’s Principles of Management
 Stability of Personnel Tenure
• Long-term employment is important for the
development of skills that improve the
organization’s performance (it also makes
employees feel secure, but beware complacency)
 Subordination of Individual Interest to the
Common Interest
• The interest of the organization takes precedence
over that of the individual employee.

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Fayol’s Principles of Management
Esprit de corps
• Comradeship and
shared enthusiasm
foster devotion to
the common cause
(the success of the
organization).

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Difference?
Management theory is evolving.
How did Fayol’s approach differ from F.
W. Taylor’s Scientific Management?
How did it differ from Max Weber’s
approach?

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Behavioral Management Theory
(The next evolutionary step)
Behavioral Management
• The study of how managers should behave
in order to motivate employees to achieve
organizational goals.

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Behavioral Management
Mary Parker Follett
• Concerned that Taylor ignored the human side of
the organization
 Suggested workers help in analyzing their jobs

 If workers have relevant knowledge of the

task, then they should control the task


 This is the heart of the Toyota Production

System (TPS)

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The Hawthorne Studies
Human Relations Implications
• Hawthorne effect — workers responded to
management attention and were more
productive.
• Gave rise to the field of Organizational
Behavior and the Human Relations
Movement: the study of the factors that
impact how individuals and groups respond
and act in organizations.
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Theory X and Theory Y
Douglas McGregor proposed two different sets
of assumptions about workers.
• Theory X assumes the average worker is
lazy, dislikes work and will do as little as
possible (you have all met this person).
 Managers must closely supervise and

control through reward and punishment


(carrot and stick).
 Mostly wrong!

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Theory X and Theory Y
• Theory Y assumes workers want to do a
good job and the job itself will determine if
the worker likes the work.
 Managers should allow workers greater

latitude and create an organization to


stimulate the workers.
 Mostly right!

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Management Science Theory
A management approach using rigorous
quantitative techniques to maximize
productive use of
organizational
resources.

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Management Science Theory
• Quantitative management — utilizes
linear and nonlinear programming,
modeling, simulation systems and
queuing and chaos theory.
• Operations management —
techniques used to analyze all
aspects of the production system.
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Management Science Theory
• Total Quality Management (TQM) —
focuses on analyzing input,
conversion, and output activities to
increase product quality (SPC, PDCA,
Deming, Juran, Japan)
• Management Information Systems
(MIS) — provide information vital for
effective decision making and control
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Organizational Environment Theory

Organizational Environment:

The set of outside forces and conditions


that affect a manager’s ability to acquire
and use resources efficiently and
effectively – THE WORLD IN YOUR
FACE

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Contingency Theory
There is no one best way to organize
Organizational structures and control
systems a manager chooses are
contingent on characteristics of the
external environment. Organization
needs to be flexible and adaptive.
More correct than other theories

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Type of Structure
Mechanistic Structure
• Authority is centralized at the top.
• Employees are closely monitored and
managed -- Theory X.
• Can be very efficient in a stable
environment; GM a decade ago.
• Not effective in today’s environment.
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Type of Structure
Organic Structure
• Authority is decentralized throughout the
organization; looser control (Theory Y)
• Reliance on shared norms and culture is greater
• Heavy reliance on cross-functional teams
• Works best when environment is unstable and
rapidly changing
• Toyota to a degree; most silicon valley companies

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Question
How has management theory and
practice evolved over the decades?
From what to what?

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Management Evolution
From process to people
From totalitarian to team

From command to consensus

From tall and rigid to flexible and flat

From eyes-in to eyes-out

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The Third Wave of Evolution
Renewed emphasis on process caused by
influx of Japanese companies and
management methods into North America
over the past 25 years.

Renewed attention to process coupled with


emphasis on people housed in flat, agile and
adaptable corporate structures -- a powerful
competitive combination.
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