CAVENDISH UNIVERSITY ARMENIA 2008 Contemporary Trends in Developing and Organizing Management Management Thought: Past and Present

The Value of History and Theory People ignorant of history are destined to repeat it. Management theories and schools of thought represent different viewpoints and strategies for managing people, making decisions, and solving problems. Each school offers something of value for today’s managers. Theory gives us reasons for doing things one way and not another. By knowing both theory and history, managers in every field can avoid past mistakes and forecast, predict and set sound goals before committing resources to achieving them. Managers with knowledge of diverse theories can see problems from more then one point of view; this ability increases the number of problem solving options. Each theory provides tools to help managers make decisions and solve problems.

Management theory and history Classical perspectiveBehavioral perspective Quantitative perspective Integrating perspectives Contemporary thoughts

First comers of theory First came the classical scientific school, which focused on the manufacturing environment and getting work done on the factory floor. Second came the classical administrative school, which emphasized the flow of information and how organizations should operate. Both schools articulated principles and functions of management. Scientific school largely discussed effective management of production and operations and administrative school concentrated on management of organizations, particularly on top and middle management issues.

Management theory – classical perspective Summary Scientific management focused on employees within organization and ways to improve their productivity (Frederik Taylor, Frank and Lillian Gilbreth, Henry Gantt, Harrington Emerson). Administrative management focused on the total organization and ways to make it more efficient and effective (Henri Fayol, Lyndall Urwick, Max Weber, Chester Barnard). Period of greatest interest 1885-mid 1950’s. Contributions Laid foundations for management theory. Identified key management processes, functions and skills that are still recognized today. Focused attention on management as a subject for scientific inquiry. Limitations More appropriate for stable and simple organizations than for today’s dynamic and complex organizations. Prescribed universal procedures that are not appropriate in some settings. Viewed employees as tools rather than resources.

Management theory – classical perspective Charles Babbage: The most important principle of management is the division of labor amongst those who perform the work. Frederick Taylor, father of Scientific Management, applied scientific methods of to factory problems and argued the proper use of human labor, tools and time. He introduced work breaks and the piece-rate system for worker pay. Frank and Lilian Gilberth added Fayol’s findings: they concentrated on removing unnecessary movements and causes of fatigue. Henry Gantt invented the Gantt chart, a graphic means of representing and planning production. The classical scientific thinkers taught managers to analyze everything, teach effective methods to others, constantly monitor workers, plan responsibility, and organize and control the work and the workers.

As the complexity of organizations grew, managers needed a new theory to help them meet their new challenges. To meet this demand, a classical administrative school grew from classical scientific schools. Henry Fayol, leader of administrative school, believed management was not a personal talent that some had by birth an others didn’t. Management can be learned and taught. Administrative school was the first to present universal functions of management: foresigh, organizing, commanding, coordinating and controlling. This was the first successful attempt to present management functions which was improved in the future. Fayol developed fourteen principles of management, which are universal and applicable to any organization. Classical Administrative School

Management theory – classical perspective Fayol’s principles of effective management Division of labor Higher specialization => higher efficiency Authority Discipline Unity of command Unity of direction Subordination of individuals to the common good Remuneration Centralization Scalar chain Order Equity Stability Initiative Esprit de corps Authority is needed; formal and personal authority Respect the rules that govern the organization Reporting to one and only one superior Similar activities grouped together under one manager Interests of individuals should not be placed before the goals of the overall organization Fair compensation both to individuals and to the organization Concentration of power at the upper level as much as possible A chain of authority from the top to the bottom, and followed Coordination of resources => in the required place and in time Be kind and fair to subordinates Avoid high turnover of employees Subordinates should have freedom to take initiative Maintain teamwork, team spirit and sense of unity

Max Weber – was the first to describe the principles of bureaucracies – rational organizations based upon the control of knowledge. In the typical bureaucratic hierarchy clearly defined positions are occupied by qualify career persons selected on the basis of their expertise. Those workers are promoted according to the judgments of superiors, and the workers are subject to the disciplinary system of the organization. Mary Parker Follet – focused on how organization cope with conflict and emphasized the human element in organizations and the need to discover and enlist individual and group motivation. Follet most directly discussed the disadvantages of bureaucratic theory. She emphasized for the first time the importance of the individual – both manager and worker. She believed that people could reach their potentials only through groups. Classical Administrative School

Management theory – behavioral perspective Summary Behavioral perspective focuses on employee behavior in an organizational context. Human relations movement supplanted scientific management as the dominant approach to management in the 1930s and 1940s. Organizational behavior draws from an interdisciplinary base and recognizes the complexities of human behavior in organizational settings. Contributors – Elton Mayo, Abraham Maslow, Douglas McGregor. Period of greatest interest Human relations – 1930s – late 1940s Organizational behavior – 1950s to present Contributions Provided insights into and focused attention on motivation, group dynamics, and other interpersonal processes. Challenged the view that employees are tools. Limitations The complexity of individual behavior makes it difficult to predict it. Many managers are reluctant to use many behavioral concepts. Many scientific findings are not properly communicated to managers.

Management theory – behavioral perspective Elton Mayo – heightened management’s awareness of the social needs of workers and showed how an organizations social environment influenced productivity. He discovered that when employees were treated with dignity, in a way that showed concern for their welfare and individuality, commitment and productivity increased. Abraham Maslow – developed a needs based theory of motivation. He identified five basic needs, which he believed underlay all human behavior. Physiology – food, water, air, basic salary, sex Security – safety, absence of illness, pension Affiliation – friendship, interaction, love Esteem – respect and recognition Self-actualization – ability to reach one’s potentials

Management theory – behavioral perspective Human relations movement – McGregor’s Theory X and Theory Y People do not like work and try to avoid it; People do not like work, so managers have to control, direct, coerce, and threaten employees to get them to work toward organizational goals; People prefer to be directed, to avoid responsibility, to want security; they have little ambition. Theory X assumptions People do not naturally dislike work; work is natural part of their lives; People are internally motivated to reach objectives to which they are committed; People are committed to goals to the degree that they receive personal rewards when they reach their objectives; People will both seek and accept responsibility under favorable conditions; People have the capacity to be innovative in solving organizational problems; People are bright, but under most organizational conditions their potentials are underutilized. Theory Y assumptions

Management theory – quantitative perspective The next wave of management thought moved from concern for people to the use of quantitative tools to help plan and control nearly everything in the organization. Emphasis in the quantitative school of management theory was on mathematical approaches to management problems. In management science called operations research, models, simulations, and games are commonly used as tests: inventory models, break-even analysis, queuing theory, production scheduling, etc.

Management theory – quantitative perspective Summary Quantitative perspective focuses on applying mathematical models and processes to management situations. Management science deals with the development of mathematical models to aid decision making and problem solving. Operations management focuses more directly on the application of management science to organizations. Management information systems are systems developed to provide information to managers. Period of greatest interest 1940s to present Contributions Developed sophisticated quantitative techniques to assist in decision making. Application of models increased our understanding of complex organizational processes and situations. Very useful in the planning and controlling processes. Limitations Cannot fully explain or predict the behavior of people in organizations. Mathematical sophistication may come at the expence of other important skills. Models may require unrealistic and unfounded assumptions.

Management theory – integrating perspective Contingency perspective Recognition of the situational nature of management Response to particular characteristics of situation Systems approach Recogniton of internal interdependencies Recognition of environmental influences Classical perspective Current concerns for efficiency and productivity Behavioral perspective Current concerns for organizational behavior and the importance of human resources Quantitative perspective Current concerns for management science models and operations management Effective and efficient management

Management theory – contemporary thoughts and concerns Type Z model Type A Type J William Ouchi Excellence movement – Thomas Peters & Robert Waterman Certain “excellent” companies with long term history of success have specific characteristics Contemporary management challenges Globalization of business Quality and productivity Downsizing and cutbacks Ownership Ethics and social responsibility Work-force diversity

Kaizen and Theory Z Japanese philosophy known as Kaizen means continual improvement: modern managers realize that they can’t be content, but must constantly seek to improve how people think and act on the job. Typa A (American Management) – short term emplyment, specialized careers, individual decision making, rapid evaluation and promotion, individual responsibilty, etc. Type J (Japanese Management) – lifitime employment, nonspecialized carrers, consensual decision making, slow evaluation and promotion, collective responsibilty, etc. Type Z (Modified American) – long-term employment, moderately specialized careers, moderate consensual decision making, slow evaluation and promotion, individual responsibily, etc.