1. The Evolution of Management Thought McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter two

2. Learning Objectives Basically, this chapter briefly provides the history of management. More important than the dates and names are knowing how Principles of Management were born and have evolved so that you can understand where they are today and predict where they’ll be tomorrow. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

3. Taylor’s Principles of Scientific Management (1890’s – early 1900’s) 1. Scientifically designing the “One Best Way” to do a job, replacing “how its always been done”. Ex: Shoveling 2. Selecting the right worker for each job. 3. Studying worker strengths and weaknesses to determine what training is required and what equipment is ideal. 4. Emphasis on maximizing efficiency and minimizing waste (of time and money) 5. Monitoring performance against standards and rewarding employees accordingly 6. Goal was for the company to benefit (cost savings) and the employees to benefit (wage increases) McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

4. 2-4 Problems with Scientific Management  Companies benefited in the short run with increased efficiency, but the workers did not receive increased wages  Specialized jobs became very boring, dull.  Workers ended up distrusting the Scientific Management method.  Workers could purposely “under-perform.”  Management responded with increased use of machines and conveyors belts – no difference in approach today

5. Other Scientific Management Pioneers  Frank and Lillian Gilbreth - Used Time & Motion Studies to identify greatest efficiency in movements. Example: Bricklaying  Henry L. Gantt – Sought efficiency through task scheduling (Gantt chart) and Rewarding Productivity (Bonuses!). Also was the first major advocate for businesses and managers being socially responsible McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

6. 2-6 Administrative Management Theory Administrative Management - The study of how to create an organizational structure that leads to high efficiency and effectiveness. Max Weber - Developed the “Principles of Bureaucracy” as a formal system of organization and administration designed to ensure efficiency and effectiveness.

7. 2-7 Weber’s Principles of Bureaucracy 1) A manager’s formal authority derives from the position he holds in the organization. 2) People should occupy positions because of their performance, not because of their social standing or personal contacts. 3) Each position’s formal authority, responsibilities and relationship to other positions should be clearly specified. 4) Authority can be exercised effectively when positions are arranged hierarchically, so employees know whom to report to and who reports to them. 5) Managers must create a well-defined system of rules, standard operating procedures, and norms so they can effectively control behavior.

8. 2-8 Rules, SOPs and Norms  Rules – formal written instructions that specify actions to be taken under different circumstances to achieve specific goals  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

9. Fayol’s 14 Principles of Management (early 1900’s) 1. Division of work – There will be specialists in positions 2. Authority – over employees and in making decisions 3. Discipline – obedience and respect is required 4. Unity of command – 1 supervisor per employee 5. Unity of direction – everyone working towards the same goals 6. Subordination of individual interests to general interests – the group comes before the individual 7. Remuneration – wages depend on numerous factors McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

10. Fayol’s 14 Principles of Management 8. Centralization – how much power held by specific managers is defined 9. Scalar chain – who reports to who is clearly defined for everyone to see and communication must follow 10. Order – everything has a specific place 11. Equity – everyone will be treated the same 12. Stability – personnel planning is necessary 13. Initiative – everyone should try their best 14. Esprit de corps – harmony and unity within the organization needs to be built McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

11. Fayol’s 14 Principles of Management (early 1900’s)  These Principles are the basic framework for the Management functions of Planning, Organizing, and Controlling General Themes:  Overall Organizational efficiency  Efficient and Effective Personnel Management  Managers should act appropriately and consistently Q. What is missing in Fayol’s Principles? McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

12. Lincoln Electric Management Plan (1913) 1. An advisory board of employees. 2. A piece-rate method of compensation wherever possible. 3. A suggestion system. 4. Employee ownership of stock. 5. Year-end bonuses. 6. Life insurance for all employees. 7. Two weeks of paid vacation. 8. An annuity pension plan. 9. A promotion policy. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

13. 2-13 Behavioral Management Theory Behavioral Management - The study of how managers should personally behave to motivate employees to perform at high levels and be committed to the achievement of organizational goals. 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

14. The Hawthorne Studies (1920’s)  The Hawthorne Studies were the first to identify human variables (such as attitudes towards managers) impacted productivity: Psychological and Sociological factors might influence performance in the workplace – DUH! Group dynamics Individual recognition and attention Participation in decision making Effective supervision = productivity & morale  Catalyst for the Human Relations Movement - studying the interaction of people McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

15. The “Professional Manager” Emerges (1930’s) The Professional Manager:  Not an owner or investor in the company  Is hired to manage a facet of the company  Are responsible to employees, stockholders, and the public McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

16. 2-16 Management Science Theory  Contemporary approach to management that focuses on the use of rigorous quantitative techniques to help managers make maximum use of organizational resources to produce goods and services.

17. 2-17 Management Science Theory  Quantitative management — utilizes linear and nonlinear programming, modeling, simulation, queuing theory and chaos theory.  Operations management —techniques used to analyze any aspect of the organization’s production system.  Management Information Systems (MIS) — provides information vital for effective decision making.  Total Quality Management (TQM) —focuses on analyzing input, conversion, and output activities to increase product quality.

18. 2-18 Contingency Theory  “There is no one best way to organize”  IT DEPENDS!  The idea that the organizational structures and control systems manager choose depend on characteristics of the external environment in which the organization operates.

19. 2-19 Contingency Theory Figure 2.5

20. 2-20 Contingency Theory Mechanistic Structure  Authority is centralized at the top  Emphasis is on strict discipline and order  Employees are closely monitored and managed  Can be very efficient in a stable environment Organic Structure  Authority is decentralized throughout the organization  Departments are encouraged to take a cross- departmental or functional perspective  Works best when environment is unstable and rapidly changing

21. Theory Z Management: Blending the Best of Japanese and American Management Theories (1980’s) Japanese-Type Organization American-Type Organization Theory Z-Type Organization McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

22. Japanese-Type Organization  Lifetime employment  Collective decision making  Collective responsibility  Slow evaluation and promotion  Non-specialized career paths  True concern for employees as people McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

23. American-Type Organization  Short-term employment (relative to the Japanese)  Individual decision making  Individual responsibility  Rapid evaluation and promotion  Specialized career path  Segmented concern for employee as a person McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

24. Theory Z-Type Organization  Long-term employment  Consensual, participative decision making  Individual responsibility  Slow evaluation and promotion  Moderately specialized career paths  Concern for the employee, including their family McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

25. Major Components and Events of the Management Movement – A Chronology  U.S. Industrial Revolution (before 1875)  Captains of industry (1875-1900)  Scientific Management era (1895-1920)  Period of Solidification (1920 to early 1930s)  Human relations movement (1931 to late 1940s)  Management process period (early 1950s to early 1960s) McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

26. Major Components and Events of the Management Movement Continued  Management theory jungle (early to late 1960s)  Systems approach (late 1960s to early 1970s)  Contingency approach (1970s)  Theory Z (1980s)  Search for excellence (1980s)  Emphasis on quality, TQM (1980s-1990s)  International movement (1980s-1990s)  Management into twenty-first century McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

27. Management TODAY! Stick around for the next 3 months and find out! In the meanwhile… Q. In what ways do you think management is different now than it was in Fayol’s day (100 years ago!) Q. What do you think are the most important aspects of management today? McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.