Chapter Two.ppt

Nov 2011 Prepared by Asfaw W.
Chapter Two
The Evolution of
Management
Theory

• Management is as old as human
civilization
• Egyptians, Babylonians, Greeks,
Hebrews, Chinese, Romanians…
practiced management
• Churches and Military contributed to
the development of management
• Early contributors: Robert Owen,
Charles Babbage,…
• But as a theory, it is the result of
20th century.

• Modern management began in
the late 19th century.
– Organizations were seeking ways to
better satisfy customer needs.
– Machinery was changing the way
goods were produced.
– Managers had to increase the
efficiency of the worker-task mix.

Job specialization
• Adam Smith, 18th century economist,
found firms manufactured pins in two
ways:
– Craft -- each worker did all steps.
– Factory -- each worker specialized in one step.
• Smith found that the factory method
had much higher productivity.
– Each worker became very skilled at one,
specific task.
• Breaking down the total job allowed for
the division of labor.

Evolution of Management Theory
Neo-classical Management Theories
Modern Management Theories
Classical Management Theories

Classical Management Theories
• People are economically rational
• In 20th c, the concern in management was
how to increase productivity and
efficiency of workers
• Two perspectives : Improving the
productivity of the work force (scientific
management) and managing the entire
organization (classical organization theory)

Scientific Management theory
• Defined by Frederick Taylor (USA 1856-
1915).
• The first person to recognize the need to
adopt a scientific approach to management
• The systematic study of the relationships
between people and tasks to redesign the work
for higher efficiency.
– Taylor sought to reduce the time a worker
spent on each task by optimizing the way the
task was done.

Taylor’s four principles
• The development of a true science of
management, so that the best methods
for performing each task could be
determined.
• The scientific selection of workers, so
that each worker would be given
responsibility for the task for which he
or she was best suited.
• The scientific education and development
of the worker.
• Intimate, friendly cooperation between
management and labor.

• The principles required “Mental Revolution” on the
part of management and labor
• He introduced differential rate system. Better
rate for more efficient workers.
• He summed up his approach in these words:
Science, not rule of thumb
Harmony, not discord
Co-operation, not individualism
Maximum output, in place of restricted output
The development of each man to his greatest
efficiency and prosperity.

Problems of scientific management
1. Worker's Criticism:
• (a) Speeding up of workers
• (b) Loss of individual worker's initiative:
• (c) Problem of monotony
• (d) Reduction of Employment
• (e) Weakening of Trade Unions
• (f) Exploitation of workers
2. Employer's Criticism:
• (a) Heavy Investment:
• (b) Loss due to re-organization:
• (c) Unsuitable for small scale firms:

Henry Lawrence Gantt (USA, 1861 - 1819):
• He worked with Taylor from 1887 - 1919 at
Midvale Steel Company
Gantt’s contributions:
• Gantt chart to compare actual to planned
performance.
• Task-and-bonus plan aimed at providing extra
wages for extra work besides guarantee of
minimum wages.
• Psychology of employee relations indicating
management responsibility to teach and train
workers.
• He laid great emphasis on leadership.

The Gilbreths
Frank (USA, 1867 - 1924) and Lillian (U.S.A, 1878
- 1912)
• Frank and Lillian Gilbreth refined Taylor’s
methods.
– Made many improvements to time and motion studies.
• Time and motion studies:
– 1. Break down each action into components.
– 2. Find better ways to perform it.
– 3. Reorganize each action to be more efficient.
• Gilbreths also studied fatigue problems, lighting,
heating and other worker issues.
• Gave a thought to the welfare of workers
• Gilbreth also devised methods for avoiding wasteful and
unproductive movements.

Administrative Management
• This approach to management, also
function and process approach is primary
based on the idea of Henry Fayol (1841-
1925)
• His acute observations on the Principles of
general management first appeared in 1916
in French
• He was the first person to discuss
management as a process with specific
functions that any manager should perform

Industrial activities
• Fayol divided industrial undertakings in to six
groups:
1. Technical (Production)
2. Commercial (buying, Selling and exchanging).
3. Financial (Search for, and optimum use of capital).
4. Security (Protection of property and persons).
5. Accounting (including Statistics).
6. Managerial (Planning, organization, command,
coordination and control).
• Fayol observed that first five were well known
and he devoted most of his book to an analysis of
the sixth.

Fayol’s Principles
1. Division of Labor: allows for job
specialization.
• Fayol noted firms can have too much specialization
leading to poor quality and worker involvement.
2. Authority and Responsibility: Fayol included
both formal and informal authority resulting
from special expertise.
3. Unity of Command: Employees should have
only one boss.
4. Line of Authority: a clear chain from top to
bottom of the firm.
5. Centralization: the degree to which
authority rests at the very top.

6. Unity of Direction: One plan of action to
guide the organization.
7. Equity: Treat all employees fairly in justice
and respect.
8. Order: Each employee is put where they
have the most value.
9. Initiative: Encourage innovation.
10. Discipline: obedient, applied, respectful
employees needed.

11. Remuneration of Personnel: The payment
system contributes to success.
12. Stability of Tenure: Long-term
employment is important.
13. General interest over individual interest:
The organization takes precedence over the
individual.
14. Esprit de corps: Share enthusiasm or
devotion to the organization.

Theory of Bureaucracy
• Developed by Max Weber (1864-1920).
• Bureaucracy refers to the formal
structural process within an organization.
• Weber’s “pure form” of organization is
characterized by rationality and
impersonality.
• Rationality refers to how the parts of
organizations are designed and
coordinated to achieve specific ends.
• Impersonality implies objectivity in
interpersonal relations

Bureaucratic Principles
A Bureaucracy
should have
Written rules
System of task
relationships
Hierarchy of
authority
Fair evaluation
and reward

Key points of Bureaucracy
Authority is the power to hold people accountable for their
actions.
Positions in the firm should be held based on performance
not social contacts.
Position duties are clearly identified. People should know
what is expected of them.
Lines of authority should be clearly identified. Workers
know who reports to who.
Rules, Standard Operating Procedures (SOPs), & Norms
used to determine how the firm operates.
• Advantages: precision, speed, un ambiguity, continuity, unity,
strict subordination and the like.
• Disadvantages: red -tape or excessive procedure, rigidity,
and neglect of the human factor.

Contributions of Classical management
thought
Contributions:
• Identified the field of management and its
process and functions
• Job analysis, work simplification, incentive
wage systems, etc.
• The application of the idea of productivity
and efficiency to many organization
• Provision of guidelines and principles that
tend to be important to all types of
organizations

Limitations
• Insights from classical management
are simplistic for today’s complex
organizations
• Reliance on experience
• Untested assumptions
• Failure to consider informal
organizations
• Human machinery

Neo Classical Theories
• Modified, improved, and extended
the classical management approach
• Two branches: Human Relations
approach and behavioral approach

Human relations Approach
• Hawthorne studies Led by Elton Mayo (AUS 1880 – 1949)
• Study of worker efficiency at the Hawthorne
Works of the Western Electric Co. during
1924-1932.
– Worker productivity was measured at various levels of
light illumination.
– Researchers found that regardless of whether the light
levels were raised or lowered, productivity rose.
• Actually, it appears that the workers enjoyed
the attention they received as part of the
study and were more productive.
• Informal work groups and the social environment of
employees have positive influence on productivity.
• Employee’s motivation is based on both physiological, and
socio-psychological needs.

Behavioral science approach
• Man is much more complex than the
“economic man” and “social man”
descriptions
• This approach concentrates more on the
nature of the work itself, and the degree
to which it can fulfill the human need
• also focused on communication, motivation
and leadership areas.
• Contributors: Elton Mayo, Douglas
McGregor, Abraham Maslow, etc.

McGregor’s Theory X and Theory Y
• Douglas McGregor proposed the two
different sets of worker assumptions.
 Theory X: Assumes the average worker is lazy,
dislikes work and will do as little as possible.
• Managers must closely supervise and control through
reward and punishment.
 Theory Y: Assumes workers are not lazy, want
to do a good job and the job itself will
determine if the worker likes the work.
• Managers should allow the worker great latitude, and
create an organization to stimulate the worker.

Theory X v. Theory Y
Employee is not lazy
Must create work setting
to build initiative
Provide authority to
workers
Theory Y
Employee is lazy
Managers must
closely supervise
Create strict rules &
defined rewards
Theory X

Modern Theories
• further refinement, extension, and
synthesis of all the classical and
neoclassical approaches to
management
• Link the twin primary objectives of
productivity (classical approach) and
employee satisfaction (neoclassical
approach)

The Management Science Approach
• Uses rigorous quantitative techniques to
maximize resources.
Quantitative management: utilizes linear
programming, modeling, simulation systems.
Operations management (Research): techniques
to analyze all aspects of the production
system.
Egs. Critical path method (CPM), Economic order
quantity (EOQ)
Total Quality Management (TQM): focuses on
improved quality.
Management Information Systems (MIS):
provides information about the organization.

Organization-Environment Theory
• Considers relationships inside and outside
the organization.
– The environment consists of forces, conditions,
and influences outside the organization.
• Systems theory considers the impact of
stages:
Input: acquire external resources.
Conversion: inputs are processed into goods and
services.
Output: finished goods are released into the
environment.

Systems Considerations
• System: A set of interrelated parts that work
together to achieve an objective.
• Subsystems: Those parts making up the whole
system.
• An open system interacts with the
environment. A closed system is self-
contained.
– Closed systems often undergo entropy and lose
the ability to control itself, and fails.
• Synergy: performance gains of the whole
surpass the components.
– Synergy is only possible in a coordinated
system.

The Organization as an Open System
Input Stage
Information
Raw
Materials
Energy
Conversion
Stage
Machines
Human skills
Output
Stage
Goods
Services
Sales of outputs
Firm can then buy inputs

Contingency Theory
• Assumes there is no one best way
to manage.
– The environment impacts the
organization and managers must be
flexible to react to environmental
changes.
– The way the organization is designed,
control systems selected, depend on the
environment.
• Technological environments change
rapidly, so must managers.

Emerging Trends in Management
• Individual assignment to write a one
page summary bout the following
trends and management contributor:
• TQM and Six Sigma
• BPR
• Theory Z
• Peter F. Drucker (November 19,
1909– November 11, 2005)

Chapter Two.ppt

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