1 What you should know so far … Define management –Compare/contrast effectiveness and efficiency. –Compare/contrast functions and roles Define entrepreneurship –Compare & contrast it with Management –Describe characteristics that contribute to an entrepreneur’s success –Describe the planning requirements associated with becoming a successful entrepreneur

2 Objectives Today Understand the 6 main approaches to management theory 1.universal (Fayol) 2.operational (Taylor) 3.behavioral (Mayo) 4.formal/informal systems (Barnard) 5.open, adaptive systems 6.contingency

3 The Practice and Study of Management Information Overload –Management has not had a systematically recorded body of knowledge until recently. –Today, vast amounts of relevant information are readily available in print and electronic media. An Interdisciplinary Field –psychology –mathematics –economics –sociology

4 No Universally Accepted Theory of Management Several perspectives or lenses –The universal process approach –The operational approach –The behavioral approach –The systems approach –The contingency approach

5 The Universal Process Approach Universal Process Approach (Fayol) –Assumes all organizations can apply same rational process. Core management process remains the same regardless of the purpose of the organization. The process can be reduced to a set of functions and related principles.

6 Fayol’s Universal Process Administration Industrielle et Générale 1916 (Translated 1949). –Coordination (and Specialization) Planning, organizing, command, coordination, and control - but as an integrated whole (military metaphor) Fayol on Taylor "So deep-rooted, however, is the conviction that the very foundation of management rests in the military type as represented by the principle that no workman can work under two bosses at the same time that … For myself I do not think that a shop can be well run in flagrant violation of this" (p. 69).

7 Fayol’s Universal Process (cont’d) Lessons from Fayol –The management process can be separated into interdependent functions (“organs”) –Line and staff functions are required –Management is a largely, though not an entirely, rational process. –Unity of command

8 Pre-Taylor workplace Workmen... –planned how fast each job should be done and how much production was allotted to each machine throughout the shop –opposed the efforts of any manager to speed up production because increases in production did not mean increases in wages –tended to get fired as (collective) output increased –penalized other workers who rate-busted (soldiered)

9 The Operational Approach Frederick W. Taylor’s Scientific Management –Developing performance standards on the basis of systematic observations and experimentation. Time & standardize practices and methods to reduce waste and increase productivity Separate task performance from task knowledge Systematically select and train workers to increase efficiency and productivity. Differential pay incentives based on established work standards (this was revolutionary)

10 The Operational Approach (cont’d) Lessons from the Operational Approach –Tasks and incentives can be (re)structured to be made more efficient and/or effective –Using scientific management doesn’t dehumanize workers (e.g. if participatory - TQM). –The operational approach fostered the development of operations management.

11 The Behavioral Approach The Human Relations Movement –Acknowledged that people are complex task performance is not totally dependent upon economic incentives (extrinsic/intrinsic) –Influenced by the threat of unionization. the Hawthorne studies

12 The Behavioral Approach (cont’d) The Threat of Unionization –The Wagner Act of 1935 (New Deal) legalized union-management collective bargaining union avoidance by firms The Hawthorne Studies (1924) –Productivity strongly affected by social dynamics (Mayo)

13 Douglas McGregor –Theory X and Theory Y Theory X: management’s traditionally negative view of employees as unmotivated and unwilling workers. Theory Y: the positive view of employees as energetic, creative, and willing workers The Behavioral Approach (cont’d)

14 The Systems Approach What is a System? –A collection of parts that operate interdependently to achieve a common purpose. Systems Approach –Posits that the performance of the whole is greater that the sum of the performance of its parts. –Analytic versus synthetic thinking: outside-in thinking versus inside-out thinking. –Seeks to identify all parts of an organized activity and how they interact.

15 The Systems Approach Chester I. Barnard’s Early Systems Perspective –Wrote Functions of the Executive. –Characterized all organizations as cooperative systems (but are they?). –Principal organizational elements willingness to serve. common purpose. communication. –Strong advocate of business ethics.

16 General Systems Theory –An area of study based on the assumptions that everything is part of a larger, interdependent arrangement. Levels of systems –Each system is a subsystem of the system above it. –Identification of systems at various levels helps translate abstract systems theory into more concrete terms.

17 General Systems Theory (cont’d) Closed Versus Open Systems –Closed system A self-sufficient entity. –Open system Something that depends on its surrounding environment for survival. –Systems are classified open (closed) by how much (how little) they interact with their environments.

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19 General Systems Theory (cont’d) New Directions in Systems Thinking –Organizational learning and knowledge management Organizations are living and thinking open systems that learn from experience and engage in complex mental processes. –Chaos theory Every complex system has a life of its own, with its own rule book. –Complex adaptive systems Complex systems are self-organizing.

20 The Contingency Approach Contingency Approach –Try to determine which managerial practices are appropriate in specific situations. Different situations require different managerial responses. E.g., under which environmental conditions should you increase/decrease departmentalization in an organization’s structure?

21 The Contingency Approach (cont’d) Lessons from the Contingency Approach –Approach emphasizes situational appropriateness rather than rigid adherence to universal principles. –Approach creates the impression that an organization is captive to its environment.