Chapter 2

The Evolution of Management

Movement of the Management Evolution

• Pre-Industrial Management Movement– Egyptian pyramids were developed from a

“labor pyramid” much like in the first chapter.– Nicolli Macavelli writing of the “The Prince” a

treaty written by Macavelli which stated “the ends justifies the means”

– In today’s corporate world there are strategies of war that are used from the early 1800’s.

• Sun Tsu – his book “the art of war”– “My enemies enemy is my friend”

Because society was becoming more advanced there was a move away from agriculture and large advances

in other areas.

• Technology• Communication

– Telegraph reached across the entire U.S.

• Transportation– The creation of the railway system.– People could travel from one side of the

country to the other.

• Because of these reasons the age of the industrial revolution began.

People who became the large captains of industry for the industrial revolution.

• John D. Rockefeller (Oil)

• James Duke (tobacco)

• Andre Carnegie (steel)

• J.P. Morgan (banking)

• Cornelius Vanderbilt (steamships and railroads)

Creation of Monopolies

• These industry leaders began to combine companies to form monopolies or trusts.

• The two Acts that helped suppress the creation of monopolies.– Interstate Commerce Act of 1887

• This act was created because railroads would give discounts to some people and not others.

• This act forced railroads to publish their rates and forbade them to change rates without notifying the public.

Sherman Act

• 1890- Which made it illegal for companies to create monopolies. The law was intended to restore competition at a time when monopolies had taken over many industries.

Management Theories

• Since the beginning of the industrial revolution there have been many different people and different theories that people have used to run their businesses we will spend some time looking at the different theories and the people involved with them.

The Theories

• Scientific Management

• Administrative Management

• Human Relations Approach

• Behavior Science Approach

• Modern Day Management Theories

Scientific Management

• Frederick Taylor– Find the “Best Way” to perform the task

1. Scientific Job Analysis1. Observe, gather to help determine the best way2. Replace the “rule of thumb” way of determining things

2. Selection of Personnel1. Select, train, teach and develop 2. Replace workers teaching themselves

3. Management Cooperation1. Mangers should cooperate with workers and make sure that

the job is up to standards.4. Functional Supervising

1. Division of work between managers and workers2. Mangers Plan, Organize, make decisions3. Workers perform the task.

2. Administrative Management

• Scientific was based on jobs of individual workers. Administrative concentrates on the management of the entire organization.

• People involved in Administrative Management – talk about them next class.

• Fayol• Gulick• Weber

Henri FayolHenri Fayol

He felt that managers perform 5 basic He felt that managers perform 5 basic functionsfunctions

1.1. PlanningPlanning

2.2. OrganizingOrganizing

3.3. CommandingCommanding

4.4. CoordinatingCoordinating

5.5. ControllingControlling

Luther GulickLuther Gulick

Coined the Acronym POSDCoRBCoined the Acronym POSDCoRB– PlanningPlanning– OrganizingOrganizing– Staffing Staffing – DirectingDirecting– CoordinatingCoordinating– ReportingReporting– BudgetingBudgeting

Max WeberMax Weber

Coined the term BuearacracyCoined the term Buearacracy– Heard of the term Buearacratic “red tape”Heard of the term Buearacratic “red tape”– A set of rational guidelines in which employees A set of rational guidelines in which employees

and managers need to follow.and managers need to follow.– Agreement between Parkway School Board and Agreement between Parkway School Board and

the PNEAthe PNEA

Human Relations ApproachHuman Relations Approach

Started with a series of studies conducted at the Started with a series of studies conducted at the Hawthorne Plant of Western Electric.Hawthorne Plant of Western Electric.

Elton Mayo – was termed the father of the Elton Mayo – was termed the father of the Hawthorne studiesHawthorne studies– Relay Assembly Test RoomRelay Assembly Test Room

Two groups in different roomsTwo groups in different rooms Lighting, length of work day, work week and rest period were Lighting, length of work day, work week and rest period were

changed throughout the week to see how productivity would changed throughout the week to see how productivity would change.change.

Nothing was proved. In fact the worse the situation got the Nothing was proved. In fact the worse the situation got the higher the productivity became from the group.higher the productivity became from the group.

Study #2Study #2– Bank Wiring Observation RoomBank Wiring Observation Room

Two groups were paid a piecework incentive pay.Two groups were paid a piecework incentive pay. The more produced the higher the payThe more produced the higher the pay

– ResultsResults The group set an acceptable norm and worked at that paceThe group set an acceptable norm and worked at that pace Those who were “rate busters” were threatened to conform Those who were “rate busters” were threatened to conform

with the groupwith the group Those who were chislers were pressured to work at a quicker Those who were chislers were pressured to work at a quicker

speed or quit.speed or quit.

– What did they learn from these two studiesWhat did they learn from these two studies Peer pressure is the major influence in production of goods.Peer pressure is the major influence in production of goods. People are motivated by social and psychological needs People are motivated by social and psychological needs

sometimes more than economic incentives. sometimes more than economic incentives.

Behavior Science ApproachBehavior Science Approach

Shows the relationship between the Shows the relationship between the individual and the way in which he relates to individual and the way in which he relates to the organization. the organization. – Chester BarnardChester Barnard

Best Know for “cooperative systems”Best Know for “cooperative systems” Everyone must work together to get the goals done.Everyone must work together to get the goals done.

– Believed that an organizations goals and the goals of the Believed that an organizations goals and the goals of the individuals working for it are kept in equilibrium.individuals working for it are kept in equilibrium.

Abraham MaslowAbraham Maslow

Hierarchy of NeedsHierarchy of Needs– 5 needs5 needs

PhysicalPhysical– (Food and Water)(Food and Water)

Security NeedsSecurity Needs– Freedom from physical, psychological or financial harmFreedom from physical, psychological or financial harm

SocialSocial– Need to talk to others, accept others and be acceptedNeed to talk to others, accept others and be accepted

Status needsStatus needs– Self-Esteem (feel good about your self)Self-Esteem (feel good about your self)

Self-fulfillmentSelf-fulfillment– Need to realize ones own potentialNeed to realize ones own potential

A survey of 10,000 workers was taken, they A survey of 10,000 workers was taken, they were asked which would they preferwere asked which would they prefer– Higher SalaryHigher Salary– Pleasant working environmentPleasant working environment

– Which did they choose?Which did they choose?

Modern Day Management TheoriesModern Day Management Theories

Douglas McGregorDouglas McGregor Fred HerzbergFred Herzberg CentralizationCentralization DecentralizationDecentralization TQMTQM Chaos Chaos Demings 14 PointsDemings 14 Points Theory ZTheory Z

Douglas McGregorDouglas McGregor

Two Basic type/ assumptions about peopleTwo Basic type/ assumptions about people– Theory XTheory X

Assumes that people are basically lazy and will avoid Assumes that people are basically lazy and will avoid working if they can.working if they can.

Theory X managers impose strict rules and make Theory X managers impose strict rules and make sure that ll important decisions are made only by sure that ll important decisions are made only by them.them.

– Theory YTheory Y Assumes that people find satisfaction in their work.Assumes that people find satisfaction in their work. Workers will work well if put in the right environmentWorkers will work well if put in the right environment

Fred HerzbergFred Herzberg

Things that cause job dissatisfaction Things that cause job dissatisfaction (hygiene factors)(hygiene factors)

Things that cause job satisfaction Things that cause job satisfaction (motivation factors)(motivation factors)

There are things that motivate workers, pay, There are things that motivate workers, pay, benefits, however those things only produce benefits, however those things only produce short time satisfaction.short time satisfaction.

2 of the Most recent theories 2 of the Most recent theories 1.Management by Objectives1.Management by Objectives

MBO is a process in which a manager and MBO is a process in which a manager and his or her subordinates collaborate in setting his or her subordinates collaborate in setting goals. goals.

Primary objective of this is to clarify the roles Primary objective of this is to clarify the roles that the subordinates are expected to play in that the subordinates are expected to play in reaching the organizations goals. reaching the organizations goals.

TQMTQM

Total Quality Management – the process of Total Quality Management – the process of checking and rechecking a product or checking and rechecking a product or service as it is provided.service as it is provided.

Plan Plan DoDo CheckCheck ActAct

How do we motivate?How do we motivate?

#1 Equity Theory-#1 Equity Theory-– Is based on people are first motivated to achieve and Is based on people are first motivated to achieve and

then to maintain a sense of equitythen to maintain a sense of equity– When you start a job- you determine how you fit in to When you start a job- you determine how you fit in to

everyone else. (Input-Output ratio)everyone else. (Input-Output ratio)– We compare how that ratio is for other people we work We compare how that ratio is for other people we work

with.with.– If ratio is same – you feel the company is treating you If ratio is same – you feel the company is treating you

fairlyfairly– If your ratio is lower, you feel unwanted, and may not If your ratio is lower, you feel unwanted, and may not

work very hard to get better.work very hard to get better.

Theory of Motivation #2 Theory of Motivation #2 Expectancy TheoryExpectancy Theory

3 people who are in line for a movement up 3 people who are in line for a movement up the company ladder.the company ladder.– Bob – hard worker, most sales for the year. Bob – hard worker, most sales for the year.

Does not want to move up the company ladderDoes not want to move up the company ladder– Sally – wants the job badly, but doesn’t think he Sally – wants the job badly, but doesn’t think he

will get it, sales performance not very good.will get it, sales performance not very good.– Mike – wants the job as bad as sally, had a Mike – wants the job as bad as sally, had a

great sales year.great sales year.

Expectancy TheoryExpectancy Theory

We would assume that Bob and Sally are We would assume that Bob and Sally are not very motivated, Bob-doesn’t want not very motivated, Bob-doesn’t want promotion, Sally sales year not very good.promotion, Sally sales year not very good.

However, Mike is highly motivated, However, Mike is highly motivated, because both sales and wants the job.because both sales and wants the job.

#3 Reinforcement Theory#3 Reinforcement Theory

The best theory to apply to business.The best theory to apply to business.– Is based on the premise that when behavior is Is based on the premise that when behavior is

rewarded and is likely to be repeated. rewarded and is likely to be repeated. – Positive reinforcement is the best motivatorPositive reinforcement is the best motivator

CentralizationCentralization

Decisions are made from one person or Decisions are made from one person or group. This is the way most large business group. This is the way most large business are.are.

DecentralizationDecentralization

Comments and questions can flow from one Comments and questions can flow from one level to another…..level to another…..

Notes about chapter

• Discuss Industrial Revolution

• Who were the captains of industry

• What Acts were Anti-Trust Acts

• Who were significant people in the growth of management.

• Theory X and Y, Deming's