The Evolution of Management

1. The Evolution of Management Theory and Practice

2. 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.

3. 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

4. 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 policies • Machiavelli (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.

5. The run up to the formal theory. • 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 Elin Whitney, James Watt and Mathew Boulton. • 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. • Rapid expansion of the railroads brought down the costs. • No government control supported the development of large corporations (J. Rockefeller- oil, Andrew Carnegie steel).

6. The run up to the formal theory. • This 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 management • Harvard 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

7. Why Study Management Theory? • Theories are perspectives with which people make sense of their world experiences • Theories 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)

8. Theories (guided by the perceptions of the researcher)

9. A. The Classical Theories The classical management focused on attainment of efficiency and productivity in an organizational setting. The predominant characteristics are: • 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. • They are based on the negative views about human nature with respect to performance of role & responsibility in an organizational setting. • They recognized that humans have emotions, but felt the emotions could be controlled by logical and rational structuring of jobs Can be classified in three main branches: 1. Scientific, 2. Administrative and 3.Bureaucratic Management

10. 1. Four pillars of Scientific Management Scientific Management arose from the need to increase productivity. • 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

11. Major Contributors to Scientific Management • Frederick Taylor (mechanical engineer) published ‘Principles of Scientific Management’ (1911) – “one best way, appropriate selection of workers, training, deployment and environment”. (experiments with loading iron blocks and shovel sizes, financial incentives). The fundamentals are: 1. Find the best practice and use as benchmarking 2. Decompose the task into its constituents – now called business process redesign 3. Get rid of things that don’t add value

12. Major Contributors – contd. • 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 • Henry L Gantt (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. He advocated that provisions of rewards is relatively more effective than threat of penalties

13. Scientific Management Era – In Perspective • The era was characterized by low standard of living, labor intensive working pattern, and financially cheap environment • Scientific management attempted to raise the standard of living by way of making workers more efficient and productive and consequently adding to their income.

14. 2. 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 contributor was: • Henry Fayol (MD of a French Coal Company) described management as the designated set of functions, 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

15. 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 Hierarchy Orderliness (right people and right material at right place) Equity (principle of hot stove) Stability of Tenure Initiative Esprit de corps 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

16. 3. 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

17. Weber’s ideal Bureaucracy • Division of labor • Authority / Hierarchy • Formal Selection • Formal rules and regulations • Impersonality • Career Orientation Weber’s concepts (bureaucracy) are a lot similar to Taylor’s (scientific management). Both emphasize rationality, predictability, impersonality, technical competence and authoritarianism.

18. General Admin / Bureaucratic Theories – 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

19. B. 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: • Employees are social beings and hence could not respond to purely rational rules, chain of authority and economic incentives. • Employees bring their social needs along with them to the organization; consequently, effective management required a more human oriented approach. • Emphasis is required on the social needs, drives and attitudes of individuals to motivate them to perform to their true potential

20. Outcome of Human Relations Movement Following fundamentals of human behavior highlighted: 1. Individual’s desire to continuously associate with his fellow workers significantly affects performance 2. Scientific management in its original form (Robotization of the work force) 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

21. Major contributors to the approach • The proponents recognized the importance of human factor in success of organizations. Four individuals stand out: • 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. • Hugo Munsterberg: Created the discipline of industrial psychology; substantially contributed to our current knowledge of selection technique, training, job design and motivation.

22. Major contributors contd. • 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. • 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 notaccomplish 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.

23. 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.

24. HR Approach - Human Relations Movement The members had unshakable optimism about peoples capabilities and strongly believed that a satisfied worker was more productive. Three stalwarts of this group are: • Dale Carnegie : Believed that way to success was through winning the cooperation of the people. • Abraham Maslow : Propounded the theory of need hierarchy (physiological, safety, social, esteem, and self actualization; lower level needs must be satisfied first). • 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)

25. HR Approach - Behavioral Science Theorists 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. They have made significant contributions to our current understanding of leadership, employee motivation, job design etc.

26. Behavioral Sciences 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.

27. C. The Quantitative Approach – The Management Science School (OR 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

28. Management Science School – In Perspective: 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

29. D. Recent Years – Towards Integration Theories are powerful influences. The longer we use a given theory, the more comfortable we become with it and more we tend not to seek out newer pastures unless forced. The days were changing fast and regular efforts were made to synthesize to customize requirements. This explains why ‘modern’ management theory is really a rich mosaic of many theories that have endured over the past century. Concern with developing a unifying framework of management began in right earnest in early 60s.

30. Recent Years:1.Process or Operational approach: 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 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.

31. The interactive nature of Management process Planning Use logic & methods to think through goals & actions Organizing Allocate work, authority & resources to achieve organizational goals Controlling Make sure the organization is moving towards its objectives Leading Direct, influence & motivate employees to perform essential tasks

33. Recent Years:2.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

34. Systems approach to management Inputs: Human, Capital Managerial, Technological others External environment Goal inputs of claimants: Employees, consumers, suppliers, Stockholders, governments, Communities and others Managerial knowledge, Goals of claimants & use of inputs Planning Organizing Facilitated by communication Linking the organization with External environment External variables & Opportunities Constraints Others Reenergizing the system External Environment Staffing Leading Controlling Outputs: Products, Services, Profits, Satisfaction, Goal integration & others To produce outputs External environment

35. External (micro) customers, suppliers, creditors, distributors dealers; though outside the Influence of the 0organization, can be influenced by them Global Global External (macro- beyond influence of the org) Competition Economic Ecosystem Labor Money Business organization Technological Socio - Cultural Materials Equipments Internal Political / Legal Demographic Global Constituents of Business Environment

37. Recent Years: 3.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.

38. Current Issues: • Workforce Diversity • Ethics • Stimulating Innovation and change • Total Quality Management • Re-engineering • Empowerment and teams • Bimodal Workforce • Downsizing • Contingent Workers

39. 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.

40. Suggested Reading • Management: P Stoner, Freeman and Gilbert, Jr. • Management: Stephen P. Robbins and Mary Coulter. • Management – A Global Perspective: Heinz Weihrich and Harold Koontz