Management and Its Evolution Chapter 1 Management and Its Evolution

Learning Objectives After reading this chapter, you should be able to: Understand the challenges organizations face in the new millennium. Specify the functions and roles of successful managers. Explain the origins of management as an academic discipline. Describe the bureaucratic and administrative approaches to the study of management. Explain the behavioral perspective in analyzing management issues. Interpret recent approaches to the study of management.

The performance of organizations depends to a large extent on how their resources are allocated and their ability to adapt to changing conditions. Successful organizations know how to manage people and resources efficiently and effectively to accomplish organizational goals and to keep those goals in tune with changes in the external environment.

Management in the New Millennium A firm can be efficient by making the best use of people, money, physical plant, and technology. It is ineffective if its goals do not provide a sustained competitive advantage. A firm with excellent goals would fail if it hired the wrong people, lost key contributors, relied on outdated technology, and made poor investment decisions.

Levels of Management Strategic Managers Tactical Managers Operational Managers

Strategic Managers The firm’s senior executives with overall responsibility for the firm.

Tactical Managers Responsible for translating the general goals and plans developed by strategic managers into specific objectives and activities.

Operational Managers Lower-level managers who supervise the operations of the organization.

Today’s Organizations More decentralization Employees have more autonomy to define their jobs, prioritize tasks, allocate time, monitor their own work, and set their own objectives. Empowerment allows employees to be less dependant on superiors to tell them what to do, and are encouraged to use their own ideas. Department barriers are breaking down by creating more teams.

Teams Cross-functional teams Cross-disciplinary Composed of individuals from different parts of the organization Cross-disciplinary Composed of team members with diverse background Define the problem, set objectives, establish priorities, proposes new ways of doing things, and assigns members to different tasks.

Management Functions Planning Organizing Leading Controlling 3

Planning The management function that assesses the management environment to set future objectives and map out activities necessary to achieve those objectives. To be effective, the objectives of individuals, teams, and management should be coordinated to support the firm’s mission.

Organizing The management function that determines how the firm’s human, financial, physical, informational, and technical resources are arranged and coordinated to perform tasks to achieve desired goals. The deployment of resources to achieve strategic goals.

Leading The management function that energizes people to contribute their best individually and in cooperation with other people. This involves: Clearly communicating organizational goals Inspiring and motivating employees Providing an example for others to follow Guiding others Creating conditions that encourage management of diversity

Controlling The management function that measures performance, compares it to objectives, implements necessary changes, and monitors progress. Many of these issues involve feedback or identifying potential problems and taking corrective action.

Management as a Set of Roles Day-to-day management activities are routine, orderly, and rational. These include: Interpersonal roles - communication with superiors, peers, subordinates, and people from outside the organization. Information Roles - obtaining, interpreting, and giving out information. Decisional Roles - choosing among competing alternatives.

Interpersonal & Informational Roles Interpersonal Roles Figurehead-visible personality representing an organization, department, or unit Leader-energizes others to get the job done properly Liaison-links together the activities of people both inside and outside of the organization. Informational Roles Include monitor and disseminator

Decisional Roles Entrepreneur-introduces changes in the organization Disturbance handler-takes corrective action, provide damage control, and responds to unexpected situations or crisis Resource allocator-assigns people and other resources to best meet organizational needs Negotiator-reaches agreements and makes compromises

The Evolution of Management Thought Administrative Management Approach Early Management Thought Contemporary Management Approach Behavioral Perspective Bureaucratic Management Approach Operational Perspectives 3

Early Management Thought Early ideas about management strategy Sun Tzu, The Art of War Early ideas about leadership Nicolò Machiavelli, The Prince Early ideas about the design and organization of work Adam Smith, The Wealth of Nations division of labor

The Operational Perspective Scientific Management Frederick W. Taylor Quantitative Management Ford W. Harris Quality Management Walter A. Shewhart

Taylor’s Four Principles of Scientific Management Scientifically study each part of a task and develop the best method of performing the task. Carefully select workers and train them to perform the task by using the scientifically developed method. Cooperate fully with workers to ensure that they use the proper method. Divide work and responsibility so that management is responsible for planning work methods using scientific principles and workers are responsible for executing the work accordingly.

SCIENTIFIC MANAGEMENT Frederick W. Taylor – early 20th century Methods engineering/time and motion studies Basic observations Great loss through inefficiencies Remedy in systematic management Standardization of job performance and uniformity of behavior Impersonalization and replaceability of workers is key to efficiency Motivation through monetary incentive systems

SCIENTIFIC MANAGEMENT STUDIES AT BETHLEHEM IRON WORKS IN 1898 REPORTED BY TAYLOR Picked Schmidt (Nolls) as his subject Trotted to and from work (over a mile) Had purchased land and was building a house Reputation of being “close with a dollar” Increased from 12 ½ to 47 tons Pay increased from $1.15 to $1.85 Earlier studies had failed because of social influences

SCIENTIFIC MANAGEMENT Frank and Lillian Gilbreth Developed tools for scientific management – time and motion studies Trained industrial engineers Popular subjects for newsreels in the 1920s “Cheaper by the Dozen” movie (not the new one) Economic needs versus other needs

Key Characteristics of Weber’s Ideal Bureaucracy Specialization of labor – functional specialization Formal rules and procedures – uniformity/stability Impersonality - fairness for clients and employees Well-defined hierarchy - decentralization Career advancement based on merit/seniority Lifelong career commitment McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

BUREAUCRATIC MANAGEMENT COSTS Rigid rules and red tape Protection of authority Slow decision making Incompatibility with changing technology Incompatibility with worker values BENEFITS Consistency Jobs clearly defined Expertise/specialization Continuity Efficient under conditions of stability

ASSESSING BUREAUCRATIC MANAGEMENT MOST EFFECTIVE WHEN: 1. Standardized information/production requiring efficiency 2. Needs of customers known and not changing 3. Technology is routine and stable 4. Need to coordinate activities of large numbers of employees

ADMINISTRATIVE MANAGEMENT Henri Fayol –14 principles 1. Division of labor – specialization 2. Authority and responsibility – delegation 3. Discipline – clear rules and consequences for violating 4. Unity of command – one boss for each employee 5. Unity of direction – similar activities under one manager 6. Subordination of individual interests to the common good 7. Remuneration – fair pay 8. Centralization – power and authority at the top

ADMINISTRATIVE MANAGEMENT 9. Scalar Chain – from the lowest employee to the top 10. Order – human and materials coordinated 11. Equity – managers should be fair with subordinates 12. Stability and tenure of staff – avoid high turnover 13. Initiative – free to take initiative 14. Esprit de corps – team spirit, sense of unity

Hawthorne Effect The discovery that paying special attention to employees motivates them to put greater effort into their jobs. (from the Hawthorne management studies, performed from 1924 – 1932 at Western Electric Company’s plant near Chicago) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

HAWTHORNE STUDIES Lighting studies by industrial engineers Productivity continued to increase even when lighting was reduced below starting levels Motivational factor Restriction of work through productivity norms Relay Assembly Test Room Studies Five workers plus supervisor Group incentive plan Mayo (not a researcher in the study) concluded that the results supported his theories concerning work groups replacing family

HAWTHORNE STUDIES Five workers not randomly selected Two workers replaced because not cooperating Replacements wanted to be in the experiment because of the financial incentives – one of these became the informal leader Workers formed tightly knit, cohesive work group with high production goals operating under informal, participative leadership plus a strong informal leader within the group If all of the results are considered, the behavioral approach has consistencies with the original scientific management studies

Contemporary Management Approach Systems Theory Contingency Theory The Learning Organization Perspective

Systems Theory Views the organization as a system of interrelated parts that function in a holistic way to achieve a common purpose. Systems theory concepts that affect management thinking: Open and closed systems Subsystems Synergy Equifinality

Contingency Theory States that there is no “one best way” to manage an organization. Because what works for one organization may not work for another Situational characteristics (contingencies) differ Managers need to understand the key contingencies that determine the most effective management practices in a given situation

The Learning Organization The management approach based on an organization anticipating change faster than its counterparts to have an advantage in the market over its competitors. Rather than reacting to change , which is a normal part of the business landscape, organizations need to anticipate change so they are well positioned to satisfy customer needs.

Emerging Perspectives and Issues The Modular Organization Every function not regarded as crucial is outsourced to an independent organization. “Disaggregated Corporation” The Intangible Organization Shifts from tangible (plant and equipment) to intangible (know-how and product design) investments Mangers and employees in today’s companies focus on opportunities rather than efficiencies