The Evolution of The Evolution of Management TheoryManagement Theory

2–2

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

• After studying the chapter, you should be able to:After studying the chapter, you should be able to:Describe how the need to increase organizational Describe how the need to increase organizational

efficiency and effectiveness has guided the efficiency and effectiveness has guided the evolution of management theory.evolution of management theory.

Explain the principle of job specialization and Explain the principle of job specialization and division of labor, and tell why the study of person-division of labor, and tell why the study of person-task relationships is central to the pursuit of task relationships is central to the pursuit of increased efficiency.increased efficiency.

Identify the principles of administration and Identify the principles of administration and organization that underlie effective organizations.organization that underlie effective organizations.

Trace the change in theories about how managers Trace the change in theories about how managers should behave to motivate and control employeesshould behave to motivate and control employees

2–3

Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)

Explain the contributions of management Explain the contributions of management science to the efficient use of organizational science to the efficient use of organizational resources.resources.

Explain why the study of the external Explain why the study of the external environment and its impact on an environment and its impact on an organization has become a central issue in organization has become a central issue in management thought.management thought.

2–4

Chapter OutlineChapter OutlineChapter OutlineChapter Outline

• Scientific Management TheoryScientific Management TheoryJob Specialization and the Division of LaborJob Specialization and the Division of LaborF. W. Taylor and Scientific ManagementF. W. Taylor and Scientific ManagementThe GilbrethsThe Gilbreths

• Administrative Management TheoryAdministrative Management TheoryThe Theory of BureaucracyThe Theory of BureaucracyFayol’s Principles of ManagementFayol’s Principles of Management

• Behavioral Management TheoryBehavioral Management TheoryThe Work of Mary Parker FollettThe Work of Mary Parker FollettThe Hawthorne Studies and Human RelationsThe Hawthorne Studies and Human Relations

2–5

Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)Chapter Outline (cont’d)

• Behavioral Management Theory (cont’d)Behavioral Management Theory (cont’d)Theory X and Theory YTheory X and Theory Y

• Management Science TheoryManagement Science Theory

• Organizational Environment TheoryOrganizational Environment TheoryThe Open Systems ViewThe Open Systems ViewContingency TheoryContingency Theory

2–6

Scientific Management TheoryScientific Management TheoryScientific Management TheoryScientific Management Theory

• Evolution of Modern ManagementEvolution of Modern ManagementBegan in the industrial revolution in the late Began in the industrial revolution in the late

19th century as:19th century as:• Managers of organizations began seeking ways to Managers of organizations began seeking ways to

better satisfy customer needs.better satisfy customer needs.

• Large-scale mechanized manufacturing began to Large-scale mechanized manufacturing began to supplanting small-scale craft production in the ways supplanting small-scale craft production in the ways in which goods were produced.in which goods were produced.

• Social problems developed in the large groups of Social problems developed in the large groups of workers employed under the factory system.workers employed under the factory system.

• Managers began to focus on increasing the efficiency Managers began to focus on increasing the efficiency of the worker-task mix.of the worker-task mix.

2–7

The Evolution of Management TheoryThe Evolution of Management TheoryThe Evolution of Management TheoryThe Evolution of Management Theory

Figure 2.1Source:

2–8

Job Specialization and Job Specialization and the Division of Laborthe Division of Labor

Job Specialization and Job Specialization and the Division of Laborthe Division of Labor

• Adam Smith (18th century economist)Adam Smith (18th century economist)Observed that firms manufactured pins in Observed that firms manufactured pins in

one of two different ways:one of two different ways:• Craft-style—each worker did all steps. Craft-style—each worker did all steps.

• Production—each worker specialized in one step.Production—each worker specialized in one step.

Realized that job specialization resulted in Realized that job specialization resulted in much higher efficiency and productivitymuch higher efficiency and productivity

• Breaking down the total job allowed for the division of Breaking down the total job allowed for the division of labor in which workers became very skilled at their labor in which workers became very skilled at their specific tasks.specific tasks.

2–9

F.W. Taylor and Scientific F.W. Taylor and Scientific ManagementManagement

F.W. Taylor and Scientific F.W. Taylor and Scientific ManagementManagement

• Scientific ManagementScientific ManagementThe systematic study of the relationships The systematic study of the relationships

between people and tasks for the purpose of between people and tasks for the purpose of redesigning the work process for higher redesigning the work process for higher efficiency.efficiency.

• Defined by Frederick Taylor in the late 1800’s to Defined by Frederick Taylor in the late 1800’s to replace informal rule of thumb knowledge.replace informal rule of thumb knowledge.

• Taylor sought to reduce the time a worker spent on Taylor sought to reduce the time a worker spent on each task by optimizing the way the task was done.each task by optimizing the way the task was done.

2–10

Four Principles of Scientific Four Principles of Scientific ManagementManagement

Four Principles of Scientific Four Principles of Scientific ManagementManagement

• Principles to increase efficiency:Principles to increase efficiency:

1.1. Study the ways jobs are performed now and Study the ways jobs are performed now and determine new ways to do them.determine new ways to do them.• Gather detailed time and motion information.Gather detailed time and motion information.

• Try different methods to see which is best.Try different methods to see which is best.

2.2. Codify the new methods into rules.Codify the new methods into rules.• Teach to all workers the new method.Teach to all workers the new method.

3.3. Select workers whose skills match the rules.Select workers whose skills match the rules.

4.4. Establish fair levels of performance and pay Establish fair levels of performance and pay a premium for higher performance.a premium for higher performance.• Workers should benefit from higher outputWorkers should benefit from higher output

2–11

Problems with Scientific ManagementProblems with Scientific ManagementProblems with Scientific ManagementProblems with Scientific Management

• Managers frequently implemented only the Managers frequently implemented only the increased output side of Taylor’s plan.increased output side of Taylor’s plan.Workers did not share in the increased Workers did not share in the increased

output.output.

• Specialized jobs became very boring, dull.Specialized jobs became very boring, dull.Workers ended up distrusting the Scientific Workers ended up distrusting the Scientific

Management method.Management method.

• Workers could purposely “under-perform.”Workers could purposely “under-perform.”Management responded with increased use Management responded with increased use

of machines and conveyors belts.of machines and conveyors belts.

2–12

Frank and Lillian GilbrethFrank and Lillian GilbrethFrank and Lillian GilbrethFrank and Lillian Gilbreth

• Refined Taylor’s work and made many Refined Taylor’s work and made many improvements to the methodologies of time improvements to the methodologies of time and motion studies.and motion studies.Time and motion studiesTime and motion studies

• Breaking up each job action into its components.Breaking up each job action into its components.

• Finding better ways to perform the action.Finding better ways to perform the action.

• Reorganizing each job action to be more efficient.Reorganizing each job action to be more efficient.

• Also studied worker-related fatigue problems Also studied worker-related fatigue problems caused by lighting, heating, and the design of caused by lighting, heating, and the design of tools and machines.tools and machines.

2–13

Administrative Management TheoryAdministrative Management TheoryAdministrative Management TheoryAdministrative Management Theory

• Administrative ManagementAdministrative ManagementThe study of how to create an organizational The study of how to create an organizational

structure that leads to high efficiency and structure that leads to high efficiency and effectiveness.effectiveness.

• Max WeberMax WeberDeveloped the concept of bureaucracy as a Developed the concept of bureaucracy as a

formal system of organization and formal system of organization and administration designed to ensure efficiency administration designed to ensure efficiency and effectiveness. and effectiveness.

2–14

Weber’s Weber’s Principles of Principles of BureaucracyBureaucracy

Weber’s Weber’s Principles of Principles of BureaucracyBureaucracy

2–15

Weber’s Five Principles of Weber’s Five Principles of BureaucracyBureaucracy

Weber’s Five Principles of Weber’s Five Principles of BureaucracyBureaucracy

• Authority is the power to hold people Authority is the power to hold people accountable for their actions.accountable for their actions.

• Positions in the firm should be held based on Positions in the firm should be held based on performance, not social contacts.performance, not social contacts.

• Position duties are clearly identified so that Position duties are clearly identified so that people know what is expected of them.people know what is expected of them.

• Lines of authority should be clearly identified Lines of authority should be clearly identified such that workers know who reports to who.such that workers know who reports to who.

• Rules, standard operating procedures (SOPs), Rules, standard operating procedures (SOPs), and norms guide the firm’s operations.and norms guide the firm’s operations.

2–16

Fayol’s Principles of ManagementFayol’s Principles of ManagementFayol’s Principles of ManagementFayol’s Principles of Management

• Division of Labor: allows for job specialization. Division of Labor: allows for job specialization. Fayol noted jobs can have too much Fayol noted jobs can have too much

specialization leading to poor quality and specialization leading to poor quality and worker dissatisfaction.worker dissatisfaction.

• Authority and ResponsibilityAuthority and ResponsibilityFayol included both formal and informal Fayol included both formal and informal

authority resulting from special expertise.authority resulting from special expertise.

• Unity of CommandUnity of CommandEmployees should have only one boss.Employees should have only one boss.

2–17

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

• Line of AuthorityLine of AuthorityA clear chain of command from top to bottom A clear chain of command from top to bottom

of the firm.of the firm.

• CentralizationCentralizationThe degree to which authority rests at the The degree to which authority rests at the

top of the organization.top of the organization.

• Unity of DirectionUnity of DirectionA single plan of action to guide the A single plan of action to guide the

organization.organization.

2–18

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

• EquityEquityThe provision of justice and the fair and The provision of justice and the fair and

impartial treatment of all employees.impartial treatment of all employees.

• OrderOrderThe arrangement of employees where they The arrangement of employees where they

will be of the most value to the organization will be of the most value to the organization and to provide career opportunities.and to provide career opportunities.

• InitiativeInitiativeThe fostering of creativity and innovation by The fostering of creativity and innovation by

encouraging employees to act on their own.encouraging employees to act on their own.

2–19

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

• DisciplineDisciplineObedient, applied, respectful employees are Obedient, applied, respectful employees are

necessary for the organization to function.necessary for the organization to function.

• Remuneration of PersonnelRemuneration of PersonnelAn equitable uniform payment system that An equitable uniform payment system that

motivates contributes to organizational motivates contributes to organizational success.success.

• Stability of Tenure of PersonnelStability of Tenure of PersonnelLong-term employment is important for the Long-term employment is important for the

development of skills that improve the development of skills that improve the organization’s performance.organization’s performance.

2–20

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

Fayol’s Principles of Management Fayol’s Principles of Management (cont’d)(cont’d)

• Subordination of Individual Interest to the Subordination of Individual Interest to the Common InterestCommon InterestThe interest of the organization takes The interest of the organization takes

precedence over that of the individual precedence over that of the individual employee.employee.

• Esprit de corpsEsprit de corpsComradeship, shared enthusiasm foster Comradeship, shared enthusiasm foster

devotion to the common cause devotion to the common cause (organization).(organization).

2–21

Behavioral Management TheoryBehavioral Management TheoryBehavioral Management TheoryBehavioral Management Theory

• Behavioral ManagementBehavioral ManagementThe study of how managers should behave to The study of how managers should behave to

motivate employees and encourage them to motivate employees and encourage them to perform at high levels and be committed to perform at high levels and be committed to the achievement of organizational goals.the achievement of organizational goals.

Focuses on the way a manager should Focuses on the way a manager should personally manage to motivate employees.personally manage to motivate employees.

2–22

Behavioral ManagementBehavioral ManagementBehavioral ManagementBehavioral Management

• Mary Parker FollettMary Parker FollettAn influential leader in early managerial An influential leader in early managerial

theorytheoryHeld a horizontal view of power and authority Held a horizontal view of power and authority

in organizationsin organizations• Suggested workers help in analyzing their jobs for Suggested workers help in analyzing their jobs for

improvementsimprovements—t—the worker knows the best way to he worker knows the best way to improve the job.improve the job.

• If workers have relevant knowledge of the task, then If workers have relevant knowledge of the task, then they should control the task.they should control the task.

2–23

The Hawthorne StudiesThe Hawthorne StudiesThe Hawthorne StudiesThe Hawthorne Studies

• Studies of how characteristics of the work Studies of how characteristics of the work setting affected worker fatigue and setting affected worker fatigue and performance at the Hawthorne Works of the performance at the Hawthorne Works of the Western Electric Company from 1924-1932.Western Electric Company from 1924-1932.Worker productivity was measured at various Worker productivity was measured at various

levels of light illumination.levels of light illumination.Researchers found that regardless of Researchers found that regardless of

whether the light levels were raised or whether the light levels were raised or lowered, worker productivity increased.lowered, worker productivity increased.

2–24

The Hawthorne StudiesThe Hawthorne StudiesThe Hawthorne StudiesThe Hawthorne Studies

• Human Relations ImplicationsHuman Relations ImplicationsHawthorne effect—workers responded to the Hawthorne effect—workers responded to the

attention they received and were more productive.attention they received and were more productive.Managers should be behaviorally trained to Managers should be behaviorally trained to

manage subordinates to elicit their cooperation manage subordinates to elicit their cooperation and increase their productivity.and increase their productivity.

Groups impose informal performance norms on Groups impose informal performance norms on their members (both “rate busters” and their members (both “rate busters” and “chiselers”)“chiselers”)

Gave rise to the field of Organizational BehaviorGave rise to the field of Organizational Behavior• The study of the factors that have an impact on how The study of the factors that have an impact on how

individuals and groups respond to and act in organizations.individuals and groups respond to and act in organizations.

2–25

Theory X and Theory YTheory X and Theory YTheory X and Theory YTheory X and Theory Y

• Douglas McGregor proposed the two different Douglas McGregor proposed the two different sets of assumptions about workers.sets of assumptions about workers.Theory X assumes the average worker is Theory X assumes the average worker is

lazy, dislikes work and will do as little as lazy, dislikes work and will do as little as possible.possible.

• Managers must closely supervise and control through Managers must closely supervise and control through reward and punishment.reward and punishment.

Theory Y assumes workers are not lazy, want Theory Y assumes workers are not lazy, want to do a good job and the job itself will to do a good job and the job itself will determine if the worker likes the work.determine if the worker likes the work.

• Managers should allow workers greater latitude, and Managers should allow workers greater latitude, and create an organization to stimulate the workers.create an organization to stimulate the workers.

2–26

Theory X versus Theory YTheory X versus Theory YTheory X versus Theory YTheory X versus Theory Y

2–27

Management Science TheoryManagement Science TheoryManagement Science TheoryManagement Science Theory

• An approach to management that uses rigorous An approach to management that uses rigorous quantitative techniques to maximize the use of quantitative techniques to maximize the use of organizational resources.organizational resources.Quantitative managementQuantitative management—utilizes linear —utilizes linear

programming, modeling, simulation systems.programming, modeling, simulation systems.Operations managementOperations management—techniques to —techniques to

analyze all aspects of the production system.analyze all aspects of the production system.Total Quality Management (TQM)Total Quality Management (TQM)—focuses —focuses

on improving quality throughout an on improving quality throughout an organization.organization.

Management Information Systems (MIS)Management Information Systems (MIS)——provides information about the organization.provides information about the organization.

2–28

Organizational Environment TheoryOrganizational Environment TheoryOrganizational Environment TheoryOrganizational Environment Theory

• Organizational EnvironmentOrganizational EnvironmentThe set of forces and conditions that operate The set of forces and conditions that operate

beyond an organization’s boundaries but beyond an organization’s boundaries but affect a manager’s ability to acquire and affect a manager’s ability to acquire and utilize resources.utilize resources.

• ..

2–29

The Open-Systems ViewThe Open-Systems ViewThe Open-Systems ViewThe Open-Systems View

• Open SystemOpen SystemA system that takes resources for its external A system that takes resources for its external

environment and converts them into goods environment and converts them into goods and services that are then sent back to that and services that are then sent back to that environment for purchase by customers.environment for purchase by customers.

Inputs: the acquisition of external resources.Inputs: the acquisition of external resources.Conversion: the processing of inputs into Conversion: the processing of inputs into

goods and services.goods and services.Output: the release of finished goods into the Output: the release of finished goods into the

environment.environment.

2–30

The Organization as an Open SystemThe Organization as an Open SystemThe Organization as an Open SystemThe Organization as an Open System

Figure 2.4

2–31

Other System ConsiderationsOther System ConsiderationsOther System ConsiderationsOther System Considerations

• Closed systemClosed systemA system that is self-contained and thus not A system that is self-contained and thus not

affected by changes occurring in its external affected by changes occurring in its external environment. environment.

Often undergoes entropy and loses its ability Often undergoes entropy and loses its ability to control itself, and fails.to control itself, and fails.

• SynergySynergyPerformance that results when individuals Performance that results when individuals

and departments coordinate their actionsand departments coordinate their actions• Performance gains of the whole surpass the sum of Performance gains of the whole surpass the sum of

the performance of the individual components.the performance of the individual components.

2–32

Contingency TheoryContingency TheoryContingency TheoryContingency Theory

• Contingency TheoryContingency TheoryThe idea that the organizational structures and The idea that the organizational structures and

control systems manager choose depend on—control systems manager choose depend on—are contingent on—characteristics of the are contingent on—characteristics of the external environment in which the external environment in which the organization operates.organization operates.

Assumes there is no one best way to manage.Assumes there is no one best way to manage.• The environment impacts the firm and managers must The environment impacts the firm and managers must

be flexible to react to environmental changes.be flexible to react to environmental changes.

In rapidly changing organizational In rapidly changing organizational environments, managers must find ways to environments, managers must find ways to coordinate different departments to respond coordinate different departments to respond quickly and effectively.quickly and effectively.

2–33

Contingency Theory of Organizational Contingency Theory of Organizational DesignDesign

Contingency Theory of Organizational Contingency Theory of Organizational DesignDesign

Figure 2.5Source:

2–34

Mechanistic and Organic StructuresMechanistic and Organic StructuresMechanistic and Organic StructuresMechanistic and Organic Structures

• Mechanistic StructureMechanistic StructureAuthority is centralized at the top. (Theory X)Authority is centralized at the top. (Theory X)Employees are closely monitored and Employees are closely monitored and

managed.managed.Can be very efficient in a stable environment.Can be very efficient in a stable environment.

• Organic structureOrganic structureAuthority is decentralized throughout the Authority is decentralized throughout the

organization. (Theory Y)organization. (Theory Y)Tasks and roles are left ambiguous to Tasks and roles are left ambiguous to

encourage employees to react quickly to encourage employees to react quickly to changing environment.changing environment.