Key Theories of Management POM Avadhesh Kumar Singh(FD) Batch – A 1

What is Management? A set of activities planning and decision making, organizing, leading, and controlling Directed at an organization’s resources human, financial, physical, and information With the aim of achieving organizational goals in an efficient and effective manner. 2

Basic Purpose of Management EFFICIENTLY Using resources wisely and in a cost-effective way EFFECTIVELY Making the right decisions and successfully implementing them 3

4 Definition of “Management” By Griffin: “A set of management functions directed at the efficient and effective utilization of resources in the pursuit of organization goals.”

5 Definition….contd…. By Koontz and Weihrich: “Management is the process of designing and maintaining an environment in which individuals working together in groups, efficiently accomplish selected aims.”

6 Peter F. Drucker - Father of Modern Management Management is an organ, organs can be described and defined only through their functions

7 Why Study Management Theory ? We have stated that the world we live in is a complex one – theories help us make sense of that complexity Management is a complex issue – management theory helps us to make sense of the complexities Theory – a coherent set of assumptions which explain the relationship between 2 or more observable facts

8 Theories provide a stable focus for understanding what we experience and provides criteria for determining what is relevant – e.g. for a business to be viable a good product and compliant workforce are essential Theories enable us to communicate efficiently and move into more complex relationships with others

9 Theories enable us to continue learning about our world Theories have boundaries i.e. there is only so much that can be covered by any particular theory

SCIENTIFIC MANAGEMENT SCHOOL CLASSICAL ORGANISATIONAL THEORY SCHOOL THE BEHAVIOURAL SCHOOL MANAGEMENT SCIENCE THE SYSTEMS APPROACH THE CONTINGENCY APPROACH Labour Shortage WW WW Protest movements 1960 – early 1970s IBM PC AT&T Divestiture Key Management Theories: An Overview 1890

11 The Evolution of Management Theory Management and organizations are products of their historical and social times and places. Management theory therefore addressed issues of relationships particular times

12 The Scientific Management School Scientific Management Theory – body of principles that addresses the efficiency of workers Devised by F.W. Taylor, H.L. Gantt, F. Gilbreth and L. Gilbreth

13 F. W. Taylor Based his philosophy on 4 principles: The true science of management, so that the best method of performing each task could be determined The scientific selection of workers, so that each worker is given the responsibility for a task for which he is best suited Scientific education and development of workers Intimate, friendly cooperation between management and workers

14 Henry Laurence Gantt ( ) Educated from John Hopkins College Engineer, as draughtsman and later Asst. engineer His publications: Work, Wage and Profits (1910); Industrial Leadership(1916); and Organizing for Work.(1919)

15 Gantt’s Thoughts…. Task and Bonus Plan Daily Balance Chart (Gantt Chart) Humanizing Science of Management Important of Leadership Training of Workers Social Responsibility of Business

16 Contributions by Frank Gilbreth Motion study Time Study One best way Training of personnel Three position plan of promotion (each worker should be considered to occupy three positions: a. the job he held before promotion to his present position b. his present position and c. the next higher job Part of his work, then would be teaching the man below him and learning from the man above him. In this way, he would qualify for promotion himself and help to provide a successor to his current job.

17 Contributions of Lillian Gilbreth It should be noted that FBG was greatly assisted by Lillian Gilbreth whom he married in 1904 Both of them used motion picture films to analyze and improve motion sequences Both developed the process of chart and the flow diagram to record process and flow patterns used in a work situation They emphasized written instructions to avoid confusion and misunderstanding (the white list card system) The Gilbreths urged that the POM and motion analysis could effectively be applied to huge untapped area of self- management. They started to search into the area of fatigue and its impact o health and productivity.

18 Scientific Management Theory (SMT) At the time Taylor felt that the success of these principles required a mental revolution on the part of management and worker Rather that focus on profit both management and labour should focus on increasing production SMT is based on production time-line studies – finding the quickest and best method to perform each component of a task In this way the amount of work that an employee was able to perform with the amount of materials and equipment available was established

19 Scientific Management Theory (SMT) Employers are encouraged to pay the more productive workers at a higher rate

20 Contributions of SMT Faster finished products Efficiency techniques applied to non- industrial organizations – e.g. training of medical personnel, fast food outlets

21 Limitations of Scientific Theory SMT led to dramatic increases in production and higher pay for some. Trade unions opposed SMT – they felt that working efficiently would exhaust all the work available and lead to retrenchments Critics of SMT felt that it put workers under to perform in unrealistic time expectations – this exploitation led to more workers joining trade unions This led to decades of distrust between labour and management (NB the relationship issue)

Scientific Management Theory Evolution of Modern Management – Began in the industrial revolution in the late 19th century as: Managers of organizations began seeking ways to better satisfy customer needs. Large-scale mechanized manufacturing began to supplanting small-scale craft production in the ways in which goods were produced. Social problems developed in the large groups of workers employed under the factory system. Managers began to focus on increasing the efficiency of the worker-task mix. 22

Classical Management Perspective Focuses on managing the whole organization rather than individuals. Henri Fayol (1845–1925) – Was first to identify the specific management functions of planning, organizing, leading, and controlling. Max Weber (1864–1920) – His theory of bureaucracy is based on a rational set of guidelines for structuring organizations. 23

Fayol’s Principles of Management Division of Labor: allows for job specialization. – Fayol noted jobs can have too much specialization leading to poor quality and worker dissatisfaction. Authority and Responsibility – Fayol included both formal and informal authority resulting from special expertise. Unity of Command – Employees should have only one boss. 24

Fayol’s Principles of Management (cont’d) 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. 25

Fayol’s Principles of Management (cont’d) Equity – The provision of justice and the fair and impartial treatment of all employees. Order – The arrangement of employees where they will be of the most value to the organization and to provide career opportunities. Initiative – The fostering of creativity and innovation by encouraging employees to act on their own. 26

Fayol’s Principles of Management (cont’d) Discipline – Obedient, applied, respectful employees are necessary for the organization to function. Remuneration of Personnel – An equitable uniform payment system that motivates contributes to organizational success. Stability of Tenure of Personnel – Long-term employment is important for the development of skills that improve the organization’s performance. 27

Fayol’s Principles of Management (cont’d) Subordination of Individual Interest to the Common Interest – The interest of the organization takes precedence over that of the individual employee. Esprit de corps – Comradeship, shared enthusiasm foster devotion to the common cause (organization). 28

Max Weber Developed the concept of bureaucracy as a formal system of organization and administration designed to ensure efficiency and effectiveness. 29

Weber’s Principles of Bureaucracy 30

Weber’s Five Principles of Bureaucracy Authority is the power to hold people accountable for their actions. Positions in the firm should be held based on performance, not social contacts. Position duties are clearly identified so that people know what is expected of them. Lines of authority should be clearly identified such that workers know who reports to who. Rules, standard operating procedures (SOPs), and norms guide the firm’s operations. 31

Behavioral Management Theory Behavioral Management – The study of how managers should behave to motivate employees and encourage them to perform at high levels and be committed to the achievement of organizational goals. – Focuses on the way a manager should personally manage to motivate employees. 32

Behavioral Management Mary Parker Follett – An influential leader in early managerial theory – Held a horizontal view of power and authority in organizations Suggested workers help in analyzing their jobs for improvements—the worker knows the best way to improve the job. If workers have relevant knowledge of the task, then they should control the task. 33

The Hawthorne Studies Studies of how characteristics of the work setting affected worker fatigue and performance at the Hawthorne Works of the Western Electric Company from – Worker productivity was measured at various levels of light illumination. – Researchers found that regardless of whether the light levels were raised or lowered, worker productivity increased. 34

The Hawthorne Studies Human Relations Implications – Hawthorne effect—workers responded to the attention they received and were more productive. – Managers should be behaviorally trained to manage subordinates to elicit their cooperation and increase their productivity. – Groups impose informal performance norms on their members (both “rate busters” and “chiselers”) – Gave rise to the field of Organizational Behavior 35

Theory X and Theory Y Douglas McGregor proposed the two different sets of assumptions about workers. – Theory X assumes the average worker is lazy, dislikes work and will do as little as possible. Managers must closely supervise and control through reward and punishment. – Theory Y assumes workers are not lazy, 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. 36

Theory X versus Theory Y 37

38 Theory Z William Ouchi researched the cultural differences between Japan and USA. – USA culture emphasizes the individual, and managers tend to feel workers follow the Theory X model. – Japan culture expects worker committed to the organization first and thus behave differently than USA workers. Theory Z combines parts of both the USA and Japan structure. – Managers stress long-term employment, work- group, and organizational focus.

39 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.

40 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.

Management Science Theory An approach to management that uses rigorous quantitative techniques to maximize the use of organizational resources. – Quantitative management—utilizes linear programming, modeling, simulation systems. – Operations management—techniques to analyze all aspects of the production system. – Total Quality Management (TQM)—focuses on improving quality throughout an organization. – Management Information Systems (MIS)—provides information about the organization. 41

42 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?

43 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.