Theories of Management

Theories of Management The Evolution of Management

What You’ll Learn • How the Industrial Revolution created a new need for management. • How the captains of industry of the last century created huge empires. • The principles of Scientific Management. • The results of the Hawthorne studies on worker productivity. • Maslow’s Hierarchy of Needs

What You’ll Learn cont’d • The difference between Theory X, Y, and Z • What TQM stands for and Deming’s 14 pts • Centralization and Decentralization • Japanese management concepts and American management practices Becoming familiar with modern management principles will help you understand how businesses function in today’s environment.

The Industrial Revolution • Refers to the period during which a country develops an industrial economy. In Europe the Industrial Revolution began in the eighteenth century; in the United States, it began around 1860, just before the Civil War. • Before the Industrial Revolution, the US economy was based on agriculture. Most people worked on small farms, using only simple technology, such as horse-drawn plows. Professional managers were not needed because most people worked for themselves.

Captains of Industry • Toward the end of the nineteenth century, powerful business people who created enormous business empires dominated and shaped the US economy. These captains of industry included John D. Rockefeller (oil), JP Morgan (banking), Andrew Carnegie (steel) and Cornelius Vanderbilt (steamships and railroads). • During this period entrepreneurs founded companies that later became industrial giants. One of these companies was Bethlehem Steel. In 1863, the company began producing the first iron railroad rails; by 1899, it was selling almost $1 trillion worth of iron and steel products in a year.

Management History • By the late 1800s, the US economy depended largely on industries such as oil, steel, railroads, and manufactured goods. • Many people left their farms to take jobs in factories, where professional managers supervised their work. • The new industrial enterprises that emerged in the nineteenth century demanded management skills that had not been necessary earlier.

Scientific Management Frederick Winslow Taylor—(1856-1915) was the father of Scientific Management. When he was working as an apprentice at the Midvale steel company, he noticed that most workers did not work as hard as they could. To increase efficiency, Taylor tried to figure out the “one best way” to perform a particular task. To do so, he used a stop watch to determine which method was the most efficient. These studies were known as “Time and Motion Studies.”

Taylor’s scientific management was based on four main ideas: • Jobs should be designed according to scientific rules rather than rule-of-thumb methods. Employers should gather, classify, and tabulate data in order to determine the “one best way” of performing a task or series of tasks.

2. Employees should be selected and trained according to scientific methods. Employers should also train employees in order to improve their performance. 3. The principles of scientific management should be explained to workers. 4. Management and workers should be interdependent so that they cooperate.

Abraham H. Maslow1908-1970 Maslow was a psychologist who developed a theory of motivation. His ideas had a significant impact on management. Maslow believed that individuals fulfill lower-level needs before seeking to fulfill higher-level needs. That is, people satisfy their need for food before they seek self-fulfillment. Because one set of needs must be met before another is sought, Maslow referred to this as a hierarchy of needs.

Maslow’s Theory Self Actualization Ego or Status Needs Love or Social Needs Safety Needs Physiological Needs

Applying Maslow’s Theory to Management At the lowest level, workers are motivated by basic needs, such as the needs for wages or salary. Basic needs also include the physical conditions in which a person works, such as heating, lighting, and noise. Once these basic needs are met, employers can address the next level of needs—safety or security needs. Some of these security needs can be met by providing employees with insurance, retirement benefits, and job security. Employees need to know that in the workplace, they are safe from physical, psychological, or financial harm.

Managers meet workers’ social needs by providing work environments in which colleagues interact by providing opportunities for co-workers to socialize with one another by providing lunch rooms or allowing employees to attend company retreats. Status needs can be met by providing employees with signs of recognition that are visible to others, such as job titles, awards, designated parking spaces, and promotions. Managers can meet employees’ need for self-fulfillment by providing them with opportunities to be creative at work or allow them to become involved in decision making.

Theory X MIT Professor Douglas McGregor Theory X—assumes that people are basically lazy and will avoid working if they can. To make sure that employees work, Theory X managers impose strict rules and make sure that all important decisions are made only by them.

Theory Y • Theory Y assumes that people find satisfaction in their work. Theory Y managers believe that people are creative and will come up with good ideas if encouraged to do so. They tend to give their employees much more freedom and let them make mistakes.

Theory Z William Ouchi, a management researcher developed this new theory of management in the 1980s Theory Z is a business management theory that integrates Japanese and American business practices. The Japanese business emphasis is on collective decision making, whereas the American emphasis is on individual responsibility.

Japanese Type Organization • Lifetime employment • Collective decision making • Collective responsibility • Slow evaluation and promotion • Implicit (understood, implied) control mechanisms • Non-specialized career path • Holistic concern for employee as a person

American Type Organization • Short-term employment • Individual decision –making • Individual responsibility • Rapid evaluation and promotion • Explicit (clear, precise, unambiguous) control mechanisms • Specialized career path • Segmented concern for employee as an employee.

Theory Z Type Organization • Long-term employment • Consentual, participative decision-making • Individual responsibility • Slow evaluation and promotion • Implicit, informal control with explicit, formalized measures • Moderately specialized career path • Holistic concern, including family

The Hawthorne Effect • The result of an experiment conducted at the Hawthorne plant of Western Electric in Cicero, Illinois in 1924. They lowered the lighting in the factory, expecting productivity to fall; but instead, to their astonishment, productivity increased. • The researchers concluded that productivity rose because workers worked harder when they received attention. This phenomenon, in which change of any kind increases productivity, has been known as the “Hawthorne Effect.”

TQM—Total Quality Management • Result of study conducted in the 1950s by W. Edwards Deming who began studying how companies ensure that the products they produce are not defective. He came up with a mathematically based approach to quality control that became known as Total Quality Management, which is a system of management based on involving all employees in a constant process of improving quality and productivity by improving how they work. This approach focuses on totally satisfying both customers and employees.

TQMDeming’s Fourteen Points • Create consistent purpose for improving products and services in order to remain competitive. • Adopt a new philosophy. We are now living in a new economic age. • Stop depending on mass inspection. Require instead that quality is built in. • Consider quality as well as price in awarding business. • Constantly improve the system of production and service. • Institute a vigorous program of job training.

Deming’s 14 points cont’d • Adopt and implement leadership. Focus on quality, not productivity. • Drive out fear so that everyone may work effectively. • Break down barriers between departments. • Eliminate numerical goals, posters, slogans, for the work force that ask for new levels of productivity without providing new methods. • Eliminate work standards that prescribe numerical quotas.

Deming’s 14 points cont’d 12. Remove barriers that stand between the hourly worker and his or her right to pride of workmanship. • Encourage education and self-improvement for everyone. • Create a structure in top management that will work every day to achieve the above 13 points. Most companies that have adopted TQM found that the performance of their companies improved.

International Management Thailand • The social culture of Thailand has given rise to highly centralized corporations with strict lines of authority. Self-managed teams would not be a viable management style because workers are used to taking direction from leaders whose authority is absolute and based on status.

Japanese Management Practices Japanese managers encourage more employee participation in decision making. Japanese managers show deeper concern for the personal well-being of their employees. Rather than present their workers with demands, Japanese managers tend to facilitate decision making by teams of workers.

Japanese Business Practices cont’d Japanese business practices have been successfully exported to the United States at Honda’s plant in Marysville, Ohio. Unlike most American plants, where there is a clear distinction between workers and managers, all Honda employees are empowered to make decisions. As a result, Honda employees are energetic and committed to producing high-quality products. They turn out one Honda Accord per minute. This high level of productivity is attributed to several innovative (new, original, groundbreaking) management practices, where workers are organized by teams rather than by function.

HERZBERG’S Motivation-Hygiene Theory Psychologist Frederick Herzberg believed that: • Intrinsic—natural, real—factors are related to job satisfaction & • Extrinsic factors are related to job dissatisfaction.

Herzberg’s Theory cont’d • On the other hand, when employees were dissatisfied, they tended to cite extrinsic factors such as company policy and administration, supervision, interpersonalrelationships, and working conditions. • Herzberg suggested emphasizing motivators—those factors that increase job satisfaction, such as recognition and growth.

Hygiene Factors • Herzberg’s term for factors such as: • Working conditions and Salary—when these factors are adequate, people will not be dissatisfied, but neither will they be satisfied. • These factors may eliminate job dissatisfaction but do not necessarily increase job satisfaction. • Herzberg proposed that his findings indicate that the opposite of “satisfaction” is “no satisfaction” and the opposite of “dissatisfaction” is “no dissatisfaction.”

Herzberg’s Theory • He believed that an individual’s attitude toward his or her work can very well determine success or failure • Intrinsic factors such as achievement, recognition, and responsibility were related to job satisfaction • When people felt good about their work, they tended to attribute these characteristics to themselves.

David McClelland’s Three-Needs Theory • The three needs are the major motives in work: • The need for Achievement: (nAch) The drive to excel, to achieve in relation to a set of standards, and to strive to succeed. • The need for Power: (nPow) The need to make others behave in a way that they would not have behaved otherwise. • The need for Affiliation: (nAff) The desire for friendly and close personal relationships.

Findings of McClelland’s Theory • McClelland found that some people have a compelling drive to succeed for personal achievement rather than for the rewards of success. • High achievers perform best when they perceive that they have a 50-50 chance of success. • They dislike gambling when the odds are high because they get no satisfaction from happenstance (fluke or accidental) success • They also dislike low odds (high probability of success) because then there is no challenge to their skills. • They like to set goals that stretch themselves a little.

J. Stacey Adams Equity Theory • Adam’s theory that employees perceive what they get from a job (outcomes) in relation to what they put into it (inputs) and then compare their input-outcome ratio with the input-outcome ratios of relevant others. • If workers compare themselves, a state of equity exists. • They believe that their situation is fair—that justice prevails.

Theories of Management