ORGANIZATIONAL MANAGEMENT IN THEORY AND PRACTICE Managing organizations in the changing world Mark Baron for Kirsti Sorama Ph.D., Principal Lecturer Seinäjoki

ORGANIZATIONAL MANAGEMENT IN THEORY AND PRACTICE Managing organizations in the changing world Mark Baron for Kirsti Sorama Ph.D., Principal Lecturer Seinjoki University of Applied Sciences School of Business and Culture http://www.seamk.fi/In-English

HISTORY OF MANAGEMENT The history of management extends to several thousand years into the past. However, it is only since the late 19th century, that management is considered a formal discipline - in other words, the practice of management is as old as the human race but its theories and conceptual frameworks are of recent origin. Yet most of the contemporary management thoughts are a twentieth century phenomenon.

HISTORY OF MANAGEMENT While early writings on management principles came from experienced practitioners, the more recent writings tend to come from academic theorists, some of whom have had no direct experience in organizational management. Although, today's management theory is the result of the interdisciplinary efforts of many people.

HISTORY OF MANAGEMENT The beginning of the modern organization occurred primarily during the middle of the nineteenth century with the rise of the factory system, principally in the textile industry, where automation and mass production became the cornerstone of productivity. Management thinking, however, was slow to evolve during the century. The need existed to define what management was in the first instance as well as to operationalize it in meaningful terms for an organization. 19 th century Steam & Speed: Industry, Power & Social Change Growing middle-class demand for consumer goods Rail networks and steamship International trade Industrial base grow Before 19 th century Practices and techniques of manufacturing were based upon generations of tradition and craftsmanship Skills were carefully guarded

Where work had been based for centuries on the tradition of guilds and trades in which skills were carefully safeguarded, the factories of the Industrial Revolution opened up jobs to unskilled laborers. The further refinement of electricity, which had been a mere curiosity before: the telegraph, electric lights, and eventually radio followed. Each of these inventions changed the world in turn. Engineering became a science

HISTORY OF MANAGEMENT Consciousness raising: Management was to be viewed as a set of practices that could be studied and improved, too. It was to be rooted in economics - achieving maximum efficiency with the resources provided.

HISTORY OF MANAGEMENT During the brief history of management as a discipline a number of more or less separate schools of management thought have emerged, some broad, some narrow in scope, and some quite specialized Each sees management from its own viewpoint; none is comprehensive These viewpoints can provide several perspectives. Todays management is both a reflection of and a reaction to past management theories

MANAGEMENT THOUGHT The schools of management thought are theoretical frameworks for study of management Management thinking progressed through several stages as scholars and practitioners working in different eras focused on what they believed to be important aspects of good management practice. Over time, management thinkers have sought ways to organize and classify the voluminous information about management that has been collected and disseminated These attempts at classification have resulted in the identification of management schools

The term management encompasses an array of different functions undertaken to accomplish a task successfully It is the process of designing and maintaining an environment (organization) in which individuals, working to gather in groups, efficiently accomplish selected aims Management is all about getting things done

EXERCISE Form a group with 5-6 members Choose one company (whatever company, which you all know), which has at least 50 employees What is needed in the company to get things done? Draw a picture where you put the items which you regard as important elements of organization

SYSTEMS PEOPLE Operational environment Outside the organization Inside the organization PROCESSES Customers Competitors Suppliers Power Organizational structure Control Information flow NETWORKS Knowledge, skills, motivation Assisting efficiency of workflow Assisting workflow and the flow of information Inside the organization NETWORKS Customers Competitors Suppliers Outside the organization Flow of materials and products Business Environment Operational environment

The consciousness of management arise

The consciousness of people in organization arise

The consciousness of people as individuals in the system of organization arise

The consciousness of people as systems arisen

Decade of multidimensional nature of management

Decade of marketing thinking and human behavior

The decade of strategic thinking

Strategic thinking continues Focus: how to become excellent in your business

Companies as bundlers of intangible resources in fast changing world

The decade of innovation and innovativeness in the world of huge opportunities and threats

What next? How the future of management will look like? Is everything worth of saying about management already been said? https://www.youtube.com/watch?v=WMF-Z74C1QE

ORGANIZATIONAL STRUCTURE AND CONTROL THEORY

Five Major Schools of Management Thought MANAGEMENT SCHOOLSBeginning Dates Emphasis CLASSICAL SCHOOL Scientific Management Bureaucratic Management Administrative Management 1880s 1920s 1940s Managing workers and organizations more efficiently BEHIVIOURAL SCHOOL Human Relations Behavioral Science 1930s 1950s Understanding human behavior in the organization QUANTITATIVE SCHOOL Management Science Operations Management Management Information Systems 1940s 1950s-1970s Increasing quality of managerial decision-making through the application of mathematical and statistical methods SYSTEMS SCHOOL1950SUnderstanding the organizations as a system that transforms inputs into outputs while in constant interaction wit its environment CONTINGENCY SCHOOL1960sApplying management principles and processes as dictated by unique characteristics of each situation

http://www.youtube.com/watch?v=EryyxLI4IK8

1. CLASSICAL ORGANIZATION THEORY Scientific management approach Bureaucratic approach Administrative approach NEO-CLASSICAL APPROACH 2. MODERN ORGANIZATION THEORY Systems approach Socio-technical approach Contingency or Situational approach Organizational theories which explain the organization and its structure can be broadly classified as classical or modern theories.

Classical Theory There are three Classical theorist who deal with the formal organization and concepts to increase management efficiency. Classical approaches Assumption: People are rational Scientific management Frederick Taylor Administrative principle Henry Fayol Bureaucratic organization Max Weber

SCIENTIFIC MANAGEMENT Underlying Assumptions There is One Best Way to do a job Workers are primarily motivated by increased earnings

SCIENTIFIC MANAGEMENT 1. One Best Way to do a job By applying scientific methods of analysis, it is possible to breakdown the work into tasks and subtasks and rearrange them into the most efficient method of working 2. Workers are primarily motivated by increased earnings. By finding the best way of producing, productivity will rise and so workers should receive better wages. This is the basis of the argument that scientific management uses money as a motivator for workers.

Taylors Scientific management require managers to Develop scientifically each operation to replace opinion and rule of thumb Determine accurately correct time and methods for each job (time and motion studies) Set up a suitable organization to take all responsibility from the workers except that of the actual job performance Management and labor cooperation rather than conflict Scientific selection and training of workers

WEBERS THEORY OF BUREAUCRACY Primary focus: Organizational Structure Cornerstone: Existence of written rules Worker should respect the right of managers to direct activities dictated by organizational rules and procedures Bureaucracy allows for the optimal form of authority - rational authority - rational application of rules or laws

Principles of Bureaucracy A managers formal authority derives from the position he or she holds in the organization (STRUCTURE) People should occupy positions because of their performance, not because of their social standing or personal contacts (SPECIALIZATION) The extend of positions formal authority and task responsibilities, and its relationship to other positions in an organization, should be clearly specified. (PREDICTABILITY AND STABILITY) That authority can be exercised effectively in an organization, positions should be arranged hierarhically, so employees know whom to report and who reports to them. (RATIONALITY) Managers must create a well-defined system of rules, standard operating procedures, and norms so that they can effectively control behavior within an organization. (DEMOCRACY)

FAYOLS EARLY THOUGHTS OF ADMINISTRATION Administrative department is specifically responsible for: ensuring that unity of action, discipline, anticipation, activity, order, etc., exist in all parts of the enterprise; recruiting, organizing and directing the workforce; ensuring good relations between the various departments and with the outside world; coordination of all efforts towards the overall goal; satisfying shareholders and employees; labor and management.

Principles of administration: Unity of command Every action must be ordered by one person only or equally For any act the person who carries it out should receive orders from only one boss. From Unity of Command flow several secondary principles, which are, as it were, corollaries of the fundamental principles: (2) the hierarchical transmission or orders, (3) the separation of powers, (4) centralization and (5) order

The rights, duties, responsibilities, and the place of each person must be determined and specified. Fayol emphases organizational charts as a method Organization must be in harmony with the environment Fayol emphases foresight as a method to fit organization to its environment

Fayol would embellish ideas as the ``elements or functions of the managers job: planning, organizing, commanding, coordinating and controlling Fourteen Principles of Management (Tools for Accomplishing Objectives) Division of work - limited set of tasks Authority and Responsibility - right to give orders Discipline - agreements and sanctions Unity of Command - only one supervisor Unity of Direction - one manager per set of activities Subordination of Individual Interest to General Interest Remuneration of Personnel - fair price for services Centralization - reduce importance of subordinates role Scalar Chain - Fayols bridge Order - effective and efficient operations Equity - kindliness and justice Stability of Tenure of Personnel - sufficient time for familiarity Initiative - managers should rely on workers initiative Esprit de corps - union is strength loyal members

The major difference between Fayol and Taylor is Fayolisms concern with the "human" and behavioral characteristics of employees and Fayol's focus on training management instead of focusing on individual worker efficiency. Fayol stressed the importance and the practice of forecasting and planning in order to train management and improve workplace productivity.

Neo-Classical approach INDIVIDUAL WORK GROUP PARTICIPATIVE MANAGEMENT The human relations movement evolved as a reaction to the tough, authoritarian structure of classical theory. Neoclassical theory displayed genuine concern for human needs

Neoclassical organizational theory: effective organizations are designed with flat hierarchical structures and a high degree of decentralization Follows workflow and productivity of classical theory, but meets employee needs

Human Relations Approach Hawthorne Studies (1924-1932) Studies of how characteristics of the work setting affected worker fatigue and performance Hawthorne effect workers attitudes toward their managers affect the level of workers performance Implications Behavior of managers and workers in the work setting is as important in explaining the level of performance as the technical aspects of the task Elton Mayo, Abraham Maslow, Douglas McGregor

Behavioral School Douglas McGregor (19061964) Developed the Theory X (traditionalnegativemanagement approach) and Theory Y (positive management approach) to workers and work motivation. Theory X assumes the average worker is lazy, dislikes work and will do as little as possible. Workers have little ambition and wish to avoid responsibility Managers must closely supervise and control through reward and punishment Theory Y assumes workers are not lazy, they want to do a good job and the job itself will determine if the worker likes the work. Managers should allow workers greater latitude, and create an organization to stimulate the workers.

Human Relations Approach Behavioral management theory An organization was viewed as a social system of people-to-people and people-to-work networks in which employees have both social needs and the desire to make meaningful contributions toward the accomplishment of organizational goals. Mary Parker Follett (18681933) Asserted that managers influence and power should flow from their knowledge and skill - capacity for organized thinking Chester Barnard (18861961) Provided insight into the concept of formal (consciously created) and informal (spontaneous) organizations within firms - the role of the executive in creating an atmosphere - manager's authority is derived from subordinates' acceptance

Barnard formulated two theories: one of authority and the other of incentives. He set the rules: The channels of communication should be definite; Everyone should know of the channels of communication; Everyone should have access to the formal channels of communication; Lines of communication should be as short and as direct as possible; Competence of persons serving as communication centers should be adequate; The line of communication should not be interrupted when the organization is functioning; Every communication should be authenticated.

Behavioral School Herbert Simon (1916 2001) Studied decision-making within organizations Programmed vs. un-programmed Developed the science of improved organizational decision- making through quantitative methods such as operations research and computer technology Theory of bounded rationality of human beings who satisfice because they do not have the intellectual capacity to maximize

Characteristics of modern approaches include: Systems viewpoint Dynamic process of interaction Multi-leveled and multidimensional Multi-motivated Probabilistic Multi-disciplinary Descriptive Multi-variable Adaptive

Modern understandings of the organization can be broadly classified into: 1.The systems approach 2.Socio-technical theory 3.Contingency or situational approach

Systems approach Organizations as open systems with interaction their environment in order to survive Organizations depend on their environment for several essential resources: customers, suppliers, employees, shareholders, governments etc. Open-system approach by Katz and Kahn, they adapted General System Theory to organizational behavior -System receive input from the environment either as information or in the form of resources -The systems then process the input internally, which is called throughput, and release outputs into the environment in an attempt to restore equilibrium to the environment. -The system then seeks feedback to determine if the output was effective in restoring equilibrium.

Systems approach Systems have structure, defined by parts and their composition Systems have behavior, which involves inputs, processing and outputs of material, energy or information Systems have interconnectivity: the various parts of a system have functional as well as structural relationships between each other System(s) have by itself function(s) or group of functions.

FEATURES OF SYSTEM APPROACH DynamicSocial SystemOpen SystemAdaptiveMultivariableIntegratedIndependent Features

ADVANTAGES OF SYSTEM APPROACH It aims at meaningful analysis of organization and management It facilitates the interaction between organization and its environment It guide manager to avoid analyzing problems in isolation and to develop an integrated approach

Socio-technical approach Based on the premise that every organization consists of the people, the technical system and the environment (Pasmore, 1988) relation between a nonhuman and a human system In this view, both systems need to be considered when jointly optimizing the two Unlike top-down managerial approaches, this emphasize bottom up participation, internalized regulation and work- group autonomy

Socio-technical approach The socio-technical approach has focused more on work group interactions than individual performance. Properly structured work groups, it is assumed, can provide incentives, assistance, and social support better than individual job design programs. Autonomous work groups, quality circles are popular examples of this perspective. Groups are often given resources and responsibilities for areas like safety and quality control and work as a team to indentify and correct inefficiencies and work issues.

The contingency or situational approach Is based on the belief that there cannot be universal guidelines which are suitable for all situations (Burns and Stalker, 1961; Woodward, 1965).

The contingency or situational approach Management techniques should be dependent upon the circumstances. Management effectiveness is contingent - or dependent - upon the interplay between the application of management behaviors and specific situations - in other words, the way you manage should change depending upon the circumstances. The theory states that task or relations motivations is contingent upon whether the manager is able to both control and effect the group's situational favorability, or outcome.

The contingency or situational approach According to the theory, you can assess situational favorability by three factors: Leader-member relations. This factor addresses the manager's perception of his cooperative relations with his subordinates. In other words, is the cooperation between you and your employees good or bad? Task structure. This factor relates to whether the structure of the work task is highly structured, subject to standard procedures and subject to adequate measures of assessment. Certain tasks are easy to structure, standardize and assess, such as the operation of an assembly line. Position power. This factor asks if the manager's level of authority is based on punishing or rewarding behavior. For example, does the manger derive his authority from providing bonuses for meeting sales goals or terminating employees for failure to meet the goals?

MODERN THEORIES AND STRUCTURES 70, 80, 90s and today

Structure Types All organizations require some form of organizational structure to implement and manage their strategies Firms frequently alter their structure as their grow in size and complexity Three basic structure type: Simple Structure Functional structure Multi-divisional Structure (M-form)

Simple Structure Owner/Manager Owner/Manager makes all major decision directly and monitors all activities Difficult to maintain this structure as the firm grows in size and complexity

Functional Structure Chief Executive Officer Corporate R&D Corporate Finance Strategic Planning Corporate Marketing Corporate Human Resources FinanceProductionEngineeringAccounting Sales and Marketing Human Resources

Multi-Divisional Structure FinanceProductionEngineeringAccounting Sales and Marketing Human Resources Chief Executive Officer Corporate R&D Corporate Finance Strategic Planning Corporate Marketing Corporate Human Resources Division

Strategic Networks A Strategic Network is a grouping of organizations that has been formed to create value through participation in an array of cooperative arrangements, such as a strategic alliance A Strategic Center Firm often manages the network The Strategic Center Firm identifies actions that increase the opportunity for each firm to achieve success through its participation in the network The Strategic Center Firm creates incentives that reduce the probability of any single firm taking advantage of its network partners

Strategic Networks Critical aspects of Strategic Center Firms function are: Strategic Outsourcing, based on core competencies Capability Development, Technology Sharing Building Linkages to Facilitate Learning What are learning units?

Strategic Networks Bilateral cooperation Center Firm cooperate with each company separately Multilateral cooperation Center Firm and partnering companies all together Cooperating companies have joint strategy and interests Information is shared to all members Processes are optimized for the best of all parties Cost sharing are even

Exercise Choose industry of Company you will work on for the rest of the Course

Documents

ORGANIZATIONAL MANAGEMENT IN THEORY AND PRACTICE Managing organizations in the changing world Mark Baron for Kirsti Sorama Ph.D., Principal Lecturer Seinäjoki