History of Organisation Thought

History of Organisation Thought

Tomislav Hernaus, Ph.D.

Course: Organisation

BDIB, 3rd semester, 2016/2017

Zagreb, October 2016

Faculty of Economics and Business

University of Zagreb

BDIB "Organisation" Tomislav Hernaus, Ph.D. History of Organisation Thought 2

Lecture contents:

Chronology of the Development of Organisation

Thought

Classical Organisation Theory

Neoclassical Organisation Theory

Human Relations School

Systems Theory of Organisation

Contingency Theory of Organisation


Learning objectives

Identify and explain major developments in the history of

management thought

Understand how historical forces influence the practice of

management

Describe the major components of the classical and

humanistic management perspectives

Emphasize the differences and shortcomings of each

theoretical approach

Introduce modern organisational theories and approaches

Show different way of understanding organisational

complexity


Early findings and practices

Prehistoric tribes – hunting & gathering

Egyptian pyramids – large projects (100.000 men involved,

20 years time period, ‘rule of ten’, distinctive dress)

Greeks – wrote about managerial concepts and practices

(Aristotle’s Politics) - “…every office should have a special function [and

one question is] should offices be divided according to the subjects with which

they deal, or according to the persons with which they deal?...” (on

departmentalization]

Roman empire – centralistic organisation with hierarchical

managerial structure; army (order and discipline; use of

tactics)

Church – the oldest organisation in the world; very flat; need

to “institutionalize” the organisation


Classical Organisation Theory

Beginning of a continuous search for the most effective

means by which people can be organized into social units in

order to achieve the goals of their companies first theory

of its kind (base upon which other schools have built)

Three main movements:

Scientific Management

Administrative Management

Bureaucracy

Basic tenets and assumptions were rooted in the industrial

revolution of the 1700s (emphasis of efficiency)

Workers were viewed not as individuals but as the

interchangeable parts (non-adequate attention on humans)


Scientific Management

Philosophy of managing human and physical resources in a

technologically “advanced world”

Growing out of the need to systematize business practices

Starting point: the factory workers could be much more

productive if their work was designed scientifically

The development of time-and-motion studies

There is “one best way” of accomplishing any given task

Significant force in: (1) the formal study of management; (2) the

practice of management; (3) preparation of the way for a

broadening of the movement; (4) the study of organisations; (5)

the business policy and the philosophy of management.

Contributors: F. W. Taylor, F. & L. Gilbreth, H. Ford, H. Gantt,

H. Emerson, L. Gulick


Scientific Management – F. W. Taylor

Frederick W. Taylor (1856-1915) – father of scientific

management

Had no training in management and relied on his own

investigations (use of scientific fact-finding method)

Two phases of his time studies: analytical and constructive

broke the job into component parts, tested them,

and reconstructed the job as it should be done (micro-

organisational and inductive approach)

Four phases of scientific management:

Task

Manager

work

er

work

er

work

er

work

er

Phase 1: Task, manager, workers

http://images.google.com/imgres?imgurl=http://faculty.virginia.edu/hius341/images/people/fwt1.jpg&imgrefurl=http://faculty.virginia.edu/hius341/images/taylorpics.htm&h=853&w=559&sz=23&hl=en&start=1&um=1&tbnid=shYfNmslcIK3hM:&tbnh=145&tbnw=95&prev=/images%3Fq%3DFrederick%2BTaylor%26um%3D1%26hl%3Den%26sa%3DN


T2

T3 T4

T1

Manager

worker worker worker worker

Phase 2: Manager analyzes the job, breaks it on simpler parts and conducts

specialization

Scientific Management – F. W. Taylor (2)

Phase 3: Job division and training

worker

worker

T2

T3 T4

T1

Manager

worker

worker


Phase 4: Manager continuously supervises, coordinates and creates

plans for each worker

worker

worker T2

T3 T4

T1

worker

worker

Manager


4 principles of scientific management:

There is “one best way” of doing things

Scientifically select, train, learn and develop each worker

Cooperate with workers and assure incentives

Distinguish job of a manager and of a worker



He developed the concept of “task management” (definite

task with written instructions and exact time allowance;

standardization; job norms; functional system of managing;

rewards for the best workers)

The manager and the consultant, as well as the lecturer

Books: Shop Management; Principles of Scientific Management

Critiques on his work:

He violated many of his own precepts in practice;

Uniform approach to people – lack of focus on individual;

characteristics (negligence of the human factor);

Lack of quality interaction between workers;

Only managers have right, workers need to obey;

Oversimplification can lead toward the loss of skills and boredom.


Scientific Management – other contributors

Frank and Lillian Gilbreth

Developed many techniques and strategies for eliminating

inefficiencies

“Cheaper by the Dozen” – they practiced time and motion studies

on their family

Henry Ford

Founder of Ford Motor Company (assembly-line system)

Henry Gantt

In early years of work closely related to F. W. Taylor

Devised his “task work with a bonus” system (emphasized the

financial interest of the foreman to teach the worker the right way)

Gantt chart – graphic aid to management planning and controlling


Picture of the Gantt Chart


Administrative Management - Henri Fayol

Henri Fayol (1841-1925) – father of modern management

Starting point: absence of theory caused lack of managerial

teaching

Used his experiences and observations to propose a body of

knowledge which included:

1. Principles as guides to thinking and practice

2. Elements of management as descriptions of the functions

managers perform

In 1916 he published General and Industrial Management,

the first complete theory of management

He proposed span of management (1:4 or 1:5 at the highest

level; 1:20 to 1:30 at the lowest level in an organization)


Administrative Management - Henri Fayol (2)

1. Division of labor

2. Authority and responsibility

3. Discipline

4. Unity of command

5. Unity of direction

6. Subordination of individual

interest to the general

interest

7. Remuneration of personnel

8. Centralization

9. Scalar chain (line of

authority)

10. Order

11. Equity

12. Stability of tenure of

personnel

13. Initiative

14. Esprit de corps

14 principles of management:

macro-organizational and deductive approach (Europe)


FUNCTIONS

OF THE

FIRM

Accounting

Commercial

(buying, selling, and

exchange activities)

Technical

(the production of goods)

Financial

(raising and using capital)

Security

(protection of

property and people)

Managerial

(Planning; Organizing; Command;

Coordination; Control)

Administrative Management - Henri Fayol (3)

Theorizing about all of the elements necessary to organize and

manage a major corporation (six principles)

the elements of management (managerial functions)


Bureaucratic Organization – Max Weber

German economist-sociologist (1864-1920) who originated the

concept of bureaucracy

Three methods of leader’s domination (kinds of authority):

Charismatic domination – exceptional performance and great

person;

Traditional domination – inherited position;

Legal domination – obtained through a legal procedure.

Created an ideal type of organisation

Bureaucracy: a form of organisational structure in which

people can be held accountable for their actions because they

are required to act in accordance with rules and standard

operating procedures


Bureaucratic Organization – Max Weber (2)

Elements/characteristics of bureaucratic organisation:

Clearly defined authority and responsibility through a division of

labor (based on legal authority);

Hierarchy of authority resulting in a chain of command;

Selection on the basis of technical qualifications;

Officials were appointed, not elected;

Administrative officials worked for fixed salaries;

Management and ownership are separated;

Formalization (strict rules, discipline and controls).

Weber’s goal was not perfection, but systematization –

moving management practices and organisational design

toward more logical ways of operating


Bureaucratic Organisation – Max Weber (3)

Advantages of Bureaucracy:

Ground rules for designing an efficient organisational hierarchy;

Written rules regarding the reward and punishment reduce the

costs of enforcement and evaluating performance;

Separates the position from the person;

People have opportunity to develop their skills;

Disadvantages of Bureaucracy:

Over time managers fail properly to control the development of

organisational hierarchy;

Employees are relying to much on rules and standard procedures;

Over reliance leads to unresponsiveness to the needs of customers

and other stakeholders.


Neoclassical Organisation Theory

A theoretical perspective critical of classical organization

theory (1940s and 1950s)

Modified, added to, and somewhat extended classical theory

did not develop its own body of theory (anti-school)

Precursors of the human relations and other theories

Chester Barnard – “The Functions of Executive” (cooperation

holds an organization together)

Herbert A. Simon – criticism of general principles of

management (they are proverbs of administration)

Philip Selznick – possible difference between individual and

organizational goals; concept of “cooptation”

Talcot Parsons – defined organisation as a social system


Human Relations School

Explored role of groups and social processes

Viewed organisations as open systems with emphasis on

organizational context

The most important factor of success worker attitudes

toward job and toward other workers

Mary Parker Follett – importance of group and its influence

on the behavior of workers

The Hawthorne Experiments (1924-1933) in Western Electric

Company plant outside Chicago (20.000 people included)

Elton Mayo, Fritz J. Roethlisberger, W. Dickson

Preceded and presaged a conscious theory of organisational

behavior


Human Relations School (2)

Main findings and principles:

The observers biased the experiment by their personal

involvement – “Hawthorne effect”

Improved performance were related to the incentive

payment scheme and to the style of the “supervisor”

People are not homo oeconomicus but homo societalis;

Efficiency improvements depend on social factors;

Leadership style is important factor of productivity;

Strict control negatively influence on the behavior;

Group is an important factor for increasing efficiency;

For most workers salary is not dominant factor of

motivation.


Systems Theory of Organisation

Ludwig von Bertalanffy (1951) – General Systems Theory

All organisations exist in the context of other organisations

and larger systems everything is related to everything else

Organisation must be studied as a whole, taking into

consideration the relationships among its parts, and its

relationship with its environment

Talcott Parsons – viewed organisational systems as vertical

subsystems (multi-level perspective):

1. The institutional level (top-level managers);

2. The managerial level (middle managers);

3. The technical core (operating employees).

Dynamic equilibrium – organisations are constantly changing


Systems Theory of Organisation (2)

Various levels of analysis in organizsations

Organization

B

Organization

C

Organization

D

Department A

Department B

Department C

Organisation A

External

environment

(interorganizational

set, community)

Organisation

level of analysis

Group level

of analysis

Individual level

of analysis


Systems Theory of Organisation (3)

Use of quantitative tools and techniques to understand and

optimize complex relationships among organisational and

environmental variables

Raw materials

Money and capital

Human resources

Inputs

Organization

obtains inputs

from the suppliers

Machines

Computers

Human skills

Transformation

Process

Organization

handle inputs and

add the value to

them

Products

Services

Outputs

Organization

releases outputs in

the environment

Selling outputs

allows buying of

new inputs


Contingency Theory of Organisation

Major theoretical lens used to view organisations

There is no one best way of managing and organising each

situation is unique

Organisational effectiveness results from fitting

characteristics of the organisation with contingencies

Contingency – any variable that moderates the effect of an

organisational characteristic on organisational performance

(e.g. environment, technology, organisational size, strategy,

etc.)

Organisation should design its structure to fit its environment

Different types of fit according to different authors and

frameworks


THANK YOU

FOR YOUR ATTENTION!

Documents

History of Organisation Thought