The Evolution of Management

Theory and Practice

Why study Management History ?

Management is the most used tool today in any enterprise. History of its evolution helps us to

understand its metamorphosis to its current level.

Looking back

Organized endeavors directing people for planning, organizing, executing, leading, monitoring and controlling activities have existed since the beginning of the civilization. (Pyramids, Monuments, Mythology)

It has been only during the last century that this subject has undergone systematic investigation, acquired a common body of knowledge and has become a formal discipline.

It has been the fastest growing discipline both in content and application over the last 50 years

The run up to the formal theory. Literature review

Sun Tzu the Chinese General (6tn century BC) in his “The art of War” recommends that the success can be achieved by being aware of utilizing the organizations strength to exploit the weakness of rival the enemy. (Coordinated group effort)Chanakya’s Arthashastra (3rd century BC) It lays down the principles that should be taken into consideration by the leader while formulating policiesMachiavelli (Discourses 1513) written for the leadership of Florence, recommended that the ends justifies means and that a leader should use fear, not hatred, to maintain control.

The run up to the formal theory. Literature review

Adam Smith (The wealth of nations -1776). Economic advantages organizations would gain by division of labor. The Industrial Revolution and the mechanization of the process (large volume outturn)Coordination of tasks (Forecasting, supply chain, quality control, monitoring, marketing) – contributed by Eli Whitney, James Watt and Mathew Boulton.Rapid expansion of the railroads brought down the costs. The modern management discipline evolved as an offshoot of economics. John Stuart Mill, Leon Walras, Alfred Marshall took forward the theory towards a more comprehensive theoretical background. No government control supported the development of large corporations (J. Rockefeller- oil, Andrew Carnegie steel).

The run up to the formal theory. Literature reviewThis demanded formal managers and formalized management practices.In 1881, Joseph Wharton took the profession one step forward by becoming the first management scholar to offer a tertiary level course in managementHarvard became one of the first American Universities to offer a graduate degree in business management in 1908. The first textbook on management was written by J Duncan in 1911. Around World War II, H. Dodge, Ronald Fisher and Thornton C. Fry introduced mathematical and statistical techniques to give it a scientific basis.Peter Drucker published “Concept of the Corporation” in 1946 describing different facets of business organization. He also developed the concept of MBO in 1950 as a comprehensive system based approach to accomplish the organizational objectives

Why Study Management Theory?

Theories are perspectives with which people make sense of their world experiencesTheories provide a stable focus for understanding what we experience (Henry Ford– large and compliant work force; Alfred Sloan of GM on market strategy)Theories enable us to communicate effectively and thus move into more complex relationships with other people (Ford / Sloan)Theories make it possible to keep learning about our world. Theories have boundaries. Triggers to look beyond. (Cold war, Model T and GM)

Development of Management Theories

Pre classical theoriesAdam Smith and

Wealth of Nations

Classical theories Behavioral School

Scientific ManagementF.W.Taylor,

Gilbreths,

Admin. ManagementHenry Fayol

Bureaucratic Management.Max Weber

Recent yearsAnalytical and

Integrative approach

Human relationsRobert Owen

Hugo MunstebergMary Parker FollettChristian Barnard

Hawthrone StudiesElton Mayo

Human resourcesDale Carnegie

Abraham MaslowDouglas McGregor

Operations Research(Mgmt Science)

Charles ThorntonRobert McNamara

Processes

Systems

Contingency

The Classical Theories The classical management focused on attainment of

efficiency and productivity in an organizational setting. The predominant characteristics are:

1. Emphasis was placed on economic rationality of the individual employee. Advocated the provision of monetary incentives to encourage to work hard to realize their true potential.

2. They are based on the negative views about human nature with respect to performance of role & responsibility in an organizational setting.

3. They recognized that humans have emotions, but felt the emotions could be controlled by logical and rational structuring of jobs

Scientific Management - Frederick Taylor

He published ‘Principles of Scientific Management’ (1911) – “one best way, appropriate selection of workers, training, deployment and environment”.

Breakdown the work into elements and develop science for each (re-look into the conventional mode) – Scientific job analysis

Select, train and deploy appropriate worker (workers will not choose where they would work)

Division of work and responsibilities.- Functional supervision and standardization

Establish synergic relationship with workers. – Management cooperation and financial incentives

(experiments with loading iron blocks and shovel sizes, financial incentives).

Scientific Management- Frank and Lillian Gilbreth Frank and Lillian Gilbreth (used camera and micro-chronometer to analyze the motions of brick laying; fatigue and motion studies). They defined time and motion studies as the science of eliminating wastefulness resulting from unnecessary, ill directed and inefficient motion. Gilbreth’s “one best way” was that required comfortable position. Materials and working areas were kept at levels that eliminated excessive stooping, bending over, walking back and forth and time out waiting for materials.

Gilbreth’s system came to be known as ‘speed work’ not from hurrying but from reduction of work through elimination of unnecessary motions

Better known for charts for planning and monitoring, and the concept of group incentives. Formed the basis of CPM, PERT (project evaluation and review technique) and Gantt Charts. He focused on the importance of motivational schemes by laying emphasis on rewards for good work rather than penalties for poor work.Devised “task and bonus” plan and is the foundation of many incentive plans of today. The basis is the daily task load for standard hours of work. If someone completed additional works, he is rewarded but the penalties for not doing the stipulated quota still earns the full day’s wages

Scientific Management –Henry L Gnatt

Scientific Management Era – In PerspectiveThe era was characterized by low standard of living, labor intensive working pattern, and financially cheap environmentScientific management attempted to raise the standard of living by way of making workers more efficient and productive and consequently adding to their income.Taylor system failed to produce the mental revolution as he had envisaged as (a) the concept of economic man was not universal, separation of planning and execution tended to produce monotony and it also did not provide satisfactory answer to the argument that men would be displaced by the system and lead to unemployment.Gilbreths demonstrated that it was possible to raise productivity by ensuring work place ease and comfort.Gnatt demonstrated that it was possible to identify and reward good workers

The General Administrative Management Grew out of need to find guidelines for managing complex

organizations to prescribe the interventions in Management. The two most prominent contributors were Fayol and Weber:

Henry Fayol (MD of a French Coal Company) described management as the designated set of functions (planning, organizing, controlling, and directing), and unlike Taylor, concentrated on the managerial level. Fayol was the first thinker to outline the desirable qualities of a manager. They are physical qualities, mental qualities, moral qualities, proper education qualities, specialized knowledge about some function and experiential knowledge from past work. They are flexible, not absolute, and must be usable regardless of changing conditions.

Fayol’s 14 Principles of Management- busted the myth that ‘Managers are Born and not made. He insisted that management is a skill which can be taught

Division of work (training)

Authority / responsibility

Discipline (obey rules)

Unity of Command

Unity of Direction (one plan)

Individual’s interest subordinate to organization’s interest.

Fair Remuneration

Centralization

HierarchyOrderliness (right people and right material at right place)

Equity (principle of hot stove)

Stability of Tenure

Initiative

Esprit de corps

Bureaucratic Management

Max Weber (German Sociologist) described goal oriented large organization as bureaucracy -- defined as an administrative system which is deliberately designed for accomplishment of large scale tasks through coordination of individual efforts in a rule bound, fair and efficient manner. It is characterized by clear division of labor, well trained personnel appointed on the basis of their competence, hierarchy (clear career path), rules and regulations, rational power (traditional / charismatic) and impersonal relationships.

Although the term bureaucracy has been popularized for referring to government organizations, it is being practiced in virtually every large and formal organization

Weber’s concepts (bureaucracy) are a lot similar to Taylor’s (scientific management). Both emphasize rationality, predictability, impersonality, technical competence and authoritarianism.

General Admin Theory – In Perspective

Fayol’s theory can be benchmarked as the starting point of the many current management ideas. He was the first to systemize managerial interventions.

Weber’s idea of bureaucracy was the model prototype of large organizations, bereft of inefficiencies, ambiguity and patronage.

Though “Bureaucracy” is not a very fancied term today, it still provides the steel frame to most large organizations

Human Relations School: Why?

This school of thought emerged in 1920 in reaction to the limitations of the classical theories that ignored the ‘human aspects’ in organizations. The main characteristics are:

1. Employees are social beings and hence could not respond to purely rational rules, chain of authority and economic incentives.

2. Employees bring their social needs along with them to the organization; consequently, effective management required a more human oriented approach.

3. Emphasis is required on the social needs, drives and attitudes of individuals to motivate them to perform to their true potential

Outcome of Human Relations Movement

Following fundamentals of human behavior highlighted:1. Individual’s desire to continuously associate with his

fellow workers significantly affects performance2. Scientific management in its original form not accepted.

Social understanding and social skills are equally important.

3. The working group informally determines the output level (dependent upon fair day’s work) that an individual worker would produce in a given timeframe.

4. Fair and transparent management can foster collaborative and cooperative atmosphere.

5. Rather than just adding to the overall compensation through production linked incentives, management needs to improve the overall quality of life of the workers

Major contributors to the approach

The proponents recognized the importance of human factor in success of organizations. Four individuals stand out:

1. Robert Owen: Scottish businessman, committed to releasing the suffering of the working class; banned child labor, regulated work hours and improved working conditions; showing concern for labor welfare was a profitable management initiative.

2. Hugo Munsterberg: Created the discipline of industrial psychology; substantially contributed to our current knowledge of selection technique, training, job design and motivation.

Major contributors contd.

3. Mary Parker Follett: Propounded that no one could become a whole person except as a member of a group. Defined “Management” as the art of getting things done. Her holistic model took into account not only individuals and groups but also politics, economics and biology. It was forerunner of the idea that management was not internally focused and is affected by external environment.

4. Chester Barnard:President of New Jersey Bell Telephone Co. viewed organizations as social systems that require nurturing. People come to join the organization to achieve the objectives they can not accomplish alone. There needs to be sync between the organization and individual goals. Adjustments need to be made to attain equilibrium; managers need to understand employees’ zone of indifference.

Hawthorne Studies.(Western Electric Co. 1924 – 33)

Elton Mayo established relationship between social environment (redesign of job, changes in work day and work week length, rest periods, individual versus group pay etc) and work output through a series of experiments known as Hawthorne Studies (Illumination experiment, Relay assembly test room study, Bank wiring room study etc). He concluded that behavior and sentiments were closely related, that group influences significantly affected individual behavior, group standards established individual worker output and money was less a factor in determining output than were group standards, group sentiments and security. These studies established that employees were different from the machines and would need to be treated differently and deferentially.

Part I – Illumination Experiments (1924-27)

These experiments were performed to find out the effect of different levels of illumination (lighting) on productivity of labor. The brightness of the light was increased and decreased to find out the effect on the productivity of the test group. Surprisingly, the productivity increased even when the level of illumination was decreased. It was concluded that factors other than light were also important.

Part II - Relay Assembly Test Room Study (1927-1929)

Under these test two small groups of six female telephone relay assemblers were selected. Each group was kept in separate rooms. From time to time, changes were made in working hours, rest periods, lunch breaks, etc. They were allowed to choose their own rest periods and to give suggestions. Output increased in both the control rooms. It was concluded that social relationship among workers, participation in decision-making, etc. had a greater effect on productivity than working conditions.

Part III - Mass Interviewing Programme (1928-1930)

21,000 employees were interviewed over a period of three years to find out reasons for increased productivity. It was concluded that productivity can be increased if workers are allowed to talk freely about matters that are important to them.

Part IV - Bank Wiring Observation Room Experiment (1932)

A group of 14 male workers in the bank wiring room were placed under observation for six months. A worker's pay depended on the performance of the group as a whole. The researchers thought that the efficient workers would put pressure on the less efficient workers to complete the work. However, it was found that the group established its own standards of output, and social pressure was used to achieve the standards of output.

1. The social and psychological factors are responsible for workers' productivity and job satisfaction. Only good physical working conditions are not enough to increase productivity.

2. The informal relations among workers influence the workers' behaviour and performance more than the formal relations in the organisation.

3. Employees will perform better if they are allowed to participate in decision-making affecting their interests.

4. Employees will also work more efficiently, when they believe that the management is interested in their welfare.

5. When employees are treated with respect and dignity, their performance will improve.

6. Financial incentives alone cannot increase the performance. Social and Psychological needs must also be satisfied in order to increase productivity.

7. Good communication between the superiors and subordinates can improve the relations and the productivity of the subordinates.

8. Special attention and freedom to express their views will improve the performance of the workers.

The Hawthorne Experiments are mainly criticized on the following grounds :-

1. Lacks Validity : The Hawthorne experiments were conducted under controlled situations. These findings will not work in real setting. The workers under observation knew about the experiments. Therefore, they may have improved their performance only for the experiments.

2. More Importance to Human Aspects : The Hawthorne experiments gives too much importance to human aspects. Human aspects alone cannot improve production. Production also depends on technological and other factors.

3. More Emphasis on Group Decision-making : The Hawthorne experiments placed too much emphasis on group decision-making. In real situation, individual decision-making cannot be totally neglected especially when quick decisions are required and there is no time to consult others.

4. Over Importance to Freedom of Workers : The Hawthorne experiments gives a lot of importance to freedom of the workers. It does not give importance to the constructive role of the supervisors. In reality too much of freedom to the workers can lower down their performance or productivity.

HR Approach - Human Relations Movement1. Dale Carnegie : Believed that way to success was

through winning the cooperation of the people.

2. Abraham Maslow : Propounded the theory of need hierarchy (physiological, safety, social, esteem, and self actualization; lower level needs must be satisfied first).

3. Douglas McGregor: Best known for his two sets of assumptions about human nature. (Theory X - motivated by external stimuli, Theory Y – inherently motivated; manager replacing the boss)

4. A group of psychologists and sociologists (Fred Fiedler, Victor Vroom, Richard Hackman etc), carefully attempted to keep their personal beliefs out of their work and relied on the scientific methods for the study of organizational behavior.

Human Resource Approach -In Perspective

The classical theorists viewed employees as machines and managers as engineers. Any failure of the employees to generate desired output was viewed as an engineering problem. Contributors to the human resource approach forced managers to reassess this simplistic model view.

However, this approach takes a myopic view of the discipline of management. It ignores managerial concepts. In any case, psychological training alone is not enough to become an effective manager.

The Quantitative Approach –(Operational Research Procedures)

During the World War II, the British brought in the concept of “Operational Research”.Post World War II, management included applications of Statistics, Optimization Models, Information Models and Computer, Simulations Linear Programming etc. They have been useful tools to decision making in planning and control.Use of such tools have added to the confidence limits to the management planning and projections.Important contributors were Robert McNamara (Ford Motors) and Charles ‘Tex’ Thornton

Process or Operational approach: Approaches to Integration

Harold Koontz in his article “management theory jungle” advocated that each approach had something to offer to the management theory and the actual practice should synthesize various view points. The approach recognizes that there is a central core of knowledge about management that is pertinent only to the field of management. The process approach, originally introduced by Fayol, is based on the management functions. The performance of these core functions planning, organizing, controlling and leading should be seen as a seamless activity of management. In addition this approach draws and absorbs knowledge from other fields.

Recent Years: Systems approach An organized enterprise does not exist in vacuum and is dependent on external environment. Open systems recognize that no organization is self contained; they would sink if they ignore external environment, goal inputs of claimants (supplier relation, govt regulations).

Two basic types of systems are closed and open. Frederic Taylor’s machine view of the organization refers to closed while Christian Barnard proposed open system where it is in constant interaction with its environment.

The job of the manager is to ensure that all parts of the organization are internally coordinated. In addition open system recognizes that organizations are not self contained and can not survive if they ignore external environment

Business organization

Internal

Labor

Equipments

Money

Materials

External (macro-beyond influence of the org)

Global

Global Global

Competition

Ecosystem Economic

Socio -Cultural

Demographic Political /Legal

Technological

External (micro) customers, suppliers, creditors, distributors dealers; though outside the Influence of the 0organization, can be influenced by them

Constituents of Business Environment

Managerial knowledge,Goals of claimants

& use of inputs

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Planning

Organizing

Staffing

Leading

Controlling

To produce outputs

External environment

Outputs:Products, Services,Profits, Satisfaction,

Goal integration & others

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External variables &OpportunitiesConstraints

Others

Ext

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External environment

Inputs:Human, Capital

Managerial, Technologicalothers

Goal inputs of claimants:Employees, consumers, suppliers,

Stockholders, governments,Communities and others

Systems approach to management

Recent Years: Contingency Approach

Early management contributors gave us principles of management and organization that they generally assumed to be universally acceptable. Later research have found exceptions.Management, like life itself, is not based on simplistic principles. Contingency approach is a product of the integration of various management theories modulated by the situational variables. Since organizations are diverse, one size does not fit all. Four important variables are, Organization size, Routine-ness of Task Technology, Environmental Uncertainty and individual differences. A contingency approach to management is intuitively logical.

Recent Years: An Introspection

Management science school offered a whole new way to think about time. With computer model simulations, forecasting has become dependable. At the same time, management science school pays less attention to relationships in the organizations. The emphasis is only on numbers, missing the importance of people and relationships. It fails to provide solution for all facets of management, especially the areas with high level of human element, like leadership, motivation etc. management in not pure science and hence cannot be modeled for all types of situations

Current Issues:

Workforce Diversity

Ethics

Stimulating Innovation and change

Total Quality Management

Re-engineering

Empowerment and teams

Bimodal Workforce

Downsizing

Contingent Workers

Conclusions:

In view of the discussions so far, management has started to become less based on the

conceptualization of classical theory of management and the typical military command

and control, and more on facilitation and support of collaborative activity. Now management deals

with the complexities of human interaction to achieve organizational or group goals in an

effective and efficient manner.

Suggested Reading

Management: P Stoner, Freeman and Gilbert, Jr.Management: Stephen P. Robbins and Mary Coulter.Management – A Global Perspective: Heinz Weihrich and Harold KoontzManagement Theory and Practice Ernest Dale