Historical Development of Management Thought

Historical Background of Management • Two events are especially significant to management history:

1. Adam Smith published ‘The Wealth of Nations’: he argued the economic advantages that organizations and society would gain from the division of labor or job specialization. Smith concluded that division of labor increased productivity by increasing each worker’s skill and dexterity, saving time lost in changing tasks and creating labor-saving inventions and machinery.

2. Industrial Revolution: when machine power was substituted for human power, it became more economical to manufacture goods in factories than at home. These factories needed managers to forecast demand, ensure that enough material was on hand to make products, assign tasks to people, direct daily activities, and so forth.

Classical Approach • Classical Approach is the first studies of management, which emphasized

rationality and making organizations and workers as efficient as possible. • Two major theories comprise the classical approach:

1. Scientific Management 2. General Administrative

Scientific Management • Scientific Management is an approach that involves using the scientific

method to determine the “one best way” for a job to be done. Frederick W. Taylor • Taylor worked at the Midvale and Bethlehem Steel Companies in

Pennsylvania • He was continually dismayed by the workers’ inefficiencies:

- Employees used vastly different techniques to do the same job - They often ‘took it easy’ on the job - Worker output was only about one-third of what was possible - Virtually no work standards existed - Workers places in jobs with little or no concern for matching their

abilities and aptitudes with the tasks they were required to do • Taylor then defined clear guidelines for improving production efficiency. • He created four principles of management:

1. Develop a science for each element of work 2. Select, train, teach, and develop workers

3. Cooperation between workers and management on proper task completion

4. Equal division of responsibility between workers and management • Taylor advocated the use of scientific methods to define the “one best

way” for a job to be done Frank and Lillian Gilbreth • The Gilbreth’s studied work to eliminate inefficient hand-and-body

motions. • They also experimented with the design and use of proper tools and

equipment for optimizing work performance. • They invented a device caused a microchronometer that recorded a

worker’s motions and the amount of time spent doing each motion • Wasted motions missed by the naked eye could be identified and

eliminated • The Gilbreths also devised a classification scheme to label 17 basic hand

motions called ‘therbligs’ • This scheme gave the Gilbreths a more precise way of analyzing a

worker’s exact hand movements General Administrative • General Administrative theory is an approach to management that

focuses on describing what managers do and what constitutes good management practice

Henri Fayol • Fayol first identified five functions that managers perform:

1. Planning 2. Organizing 3. Commanding 4. Coordinating 5. Controlling

• Fayol described the practice of management as something distinct from accounting, finance, production, distribution, and other typical business functions.

• He constructed the 14 principles of management which are the fundamental rules of management that could be applied to all organizational situations: 1. Division of work: Specialization increases output by making

employees more efficient 2. Authority: Managers must be able to give orders and authority gives

them this right 3. Discipline: Employees must obey and respect the rules that govern the

organization 4. Unity of command: Every employee should receive orders from only

one superior

5. Unity of direction: The organization should have a single plan of action to guide managers and workers

6. Subordination of individual interests to the general interest: The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole

7. Remuneration: Workers must be paid a fair wage for their services 8. Centralization: The degree to which subordinates are involved in

decision making 9. Scalar chain: The line of authority from top management to the lowest

ranks 10. Order: People and materials should be in the right place at the right

time 11. Equity: Managers should be kind and fair to their subordinates 12. Stability of tenure of personnel: Management should provide orderly

personnel planning and ensure that replacements are available to fill vacancies

13. Initiative: Employees who are allowed to originate and carry out plans will exert high levels of effort

14. Esprit de corps: Promoting team spirit will build harmony and unity within the organization

• Contributions: - Laid the foundation for later developments of management theory - Identified management processes, functions and skills that are still

recognised today • Limitations:

- More appropriate for stable and simple rather than dynamic and complex organisations

- Overlooked the needs of workers and the human desire for job satisfaction

Max Weber • Weber developed a theory of authority structures and relations based on

an ideal type of organization he called a bureaucracy • A bureaucracy is a form of organization characterized by division of

labour, clearly defined hierarchy, detailed rules and regulations, and impersonal relationships.

• A bureaucracy should have: - Division of labour: jobs broken down into simple, routine and well-

defined tasks - Career orientation: managers are career professionals, not owners of

units they manage - Impersonality: uniform application of rules and controls, not according

to personalities - Formal rules and regulations: system of written rules and standard

operating procedures - Formal selection: people selected for jobs based on technical

qualifications

- Authority hierarchy: positions organized in a hierarchy with a clear chain of command

• Weber recognized that “ideal bureaucracy” didn’t exist in reality and instead he intended it as a basis for theorizing about how work could be done in large groups.

Quantitative Approach • Quantitative approach is the use of quantitative techniques to improve

decision-making • It involves applying statistics, optimization models, information models,

computer stimulations, and other quantitative techniques to management activities.

• An area where quantitative techniques are being used is known as Total Quality Management

• Contributions: - Provided mathematical techniques for the modelling, analysis and

solution of management problems - Improves decision making particularly in planning and controlling

• Limitations: - Totally based on quantifiable measures

Total Quality Management • Total Quality Management (TQM) is a philosophy of management that is

driven by continuous improvement and responsiveness to customer needs and expectations: 1. Intense focus on the customer: the customer includes outsiders who

buy the organization’s products or services and internal customers who interact with and serve others in the organization

2. Concern for continual improvement: quality management is a commitment to never being satisfied, quality can always be improved

3. Process focused: quality management focuses on work processes as the quality of good and services is continually improved

4. Improvement in the quality of everything the organization does: This relates to the final product, how the organization handles deliveries, how rapidly it responds to complaints and how politely the phones are answered

5. Accurate measurement: quality management uses statistical techniques to measure every critical variable in the organization’s operations. These are compared against standards to identify problems, trace them to their roots, and eliminate their causes

6. Empowerment of employees: quality management involves the people on the time in the improvement process. Teams are widely used in quality management programs as empowerment vehicles for finding and solving problems

Behavioral Approach • Organizational Behavior (OB) is a field of study that researches the actions

of people at work • Contributions and limitations

– Too much division of labour can result in alienation of the individual – People are motivated primarily by group and social needs – Power equalisation – Greater commitment to organisational goals is achieved through

participation Early Advocates of Organizational Behavior Robert Owen • Concerned about deplorable working conditions • Proposed idealistic workplace • Argued the money spent improving labor was smart investment Huge Munsterberg • Suggested using psychological tests for employee selection, learning

theory concepts for employee training, and study of human behavior for employee motivation

Mary Parker Follett • Proposed more people-oriented ideas than scientific management

followers • Thought organizations should be based on group ethic Chester Barnard • Thought organizations were social systems that required cooperation • Believed manager’s job was to communicate and stimulate employees’

high levels of effort • Argued that organizations were open systems The Hawthorne Studies • The Hawthorne Studies are a series during the 1920s and 1930s that

provided new insights into individual and group behavior. • These studies were initially designed to examine the effect of various

lighting levels on worker productivity • They concluded that lighting intensity was not directly related to group

productivity and that something else must have contributed to the results • In 1972, Harvard professor Elton Mayo joined the study • Mayo concluded that:

- People’s behavior and attitudes are closely related - Group factors significantly affect individual behavior

- Group standards establish individual worker output - Money is less a factor in determining output than are group

standards, group attitudes and security • Implications of the Hawthorne studies

- Shifted the attention of managers and researchers away from the work itself towards the social setting of workers and their individual attitudes

- Many sources of individual job satisfaction and dissatisfaction - There are different ways of supervising workers - The group is important in work settings - Managers need good interpersonal skills - Social relationships at work are important - Gave birth to the Human Relations Movement

• As result of its influence on the human relations movement and behavioural science theorists, the Hawthorne studies laid the foundation for research in - Motivation - Leadership - Group behaviour and development - Other organisational behaviour topics

Contemporary Approach • Two contemporary management perspectives are part of this approach:

1. Systems Approach 2. Contingency Approach

Systems Approach • A theory which sees an organisation as a set of interrelated and

interdependent parts • There are two types of systems:

1. Closed: systems that are not influenced by and do not interact with the environment

2. Open: systems that interact with their environment • The systems approach implies that decisions and actions in one

organizational area will affect other areas • The systems approach recognizes that organizations are not self-

contained. They rely on their environment for essential inputs and as outlets to absorb their outputs.

• No organization can survive for long if it ignores government regulations, supplier relations, or the varied external constituencies on which it depends.

• Contributions and limitations – Advocates an approach to management that is rounded

Contingency Approach

• The contingency approach is a management approach, which says that

organizations are different, face different situations, and require different ways of managing.

• The primary value of the contingency approach is that it stresses that there are no simplistic or universal rules for managers to follow

• Contingency Variables – Organisation Size: as size increases, so do the problems of

coordination – Routineness of Task Technology: to achieve its purpose, an

organization uses technology. Routine technologies require organizational structures, leadership styles, and control systems that differ from those required by customized or non-routine technologies

– Environmental Uncertainty: the degree of uncertainty caused by environmental changes influences the management process. What works best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment.

– Individual Differences: Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and expectations. These and other individual differences are particularly important when managers select motivation techniques, leadership styles, and job designs.

Planning and Decision Making

Plans What is Planning? Planning involves: • Defining the organization’s objectives and goals • Establishing an overall strategy for achieving those goals • Developing plans to integrate and coordinate work activities • Concerned with what is to be done (ends) and how it is to be done

(means). • Consists of two elements: goals and plans. Why do Managers Plan? • Provides direction: can coordinate their activities, cooperate with each

other, and do what it takes to accomplish goals • Reduces uncertainty: forces managers to look ahead, anticipate change,

consider the impact of change, and develop appropriate responses • Minimizes waste and redundancy: work activities are coordinated around

plans, inefficiencies become obvious and can be corrected or eliminated

• Establishes the goals or standards used in controlling: see whether the plans have been carried out and the goals met

Planning and Performance • Formal planning is associated with positive financial results • Doing a good job planning and implementing those plans plays a bigger

part in high performance that does how much planning is done • When external forces such as governmental regulations or powerful labor

unions, constrain managers’ options and they reduce the impact planning has on an organization’s performance.

• Planning-performance relationship seems to be influenced by the planning time frame

Types of Plans • Breadth: strategic versus operational

- Strategic Plans: plans that apply to entire organisation and establish the organization’s goals

- Operational Plans: plans that involve a particular operational area of an organization

• Time Frame: short term versus long term - Long Term Plans: plans with a time frame beyond 3 years - Short Term Plans: plans covering 1 year or less

• Specificity: directional versus specific - Specific Plans: plans that are clearly defined and leave no room for

interpretation - Directional Plans: plans that are flexible and that set out general

guidelines • Frequency of use: single use versus standing

- Single-Use Plan: A one time plan specifically designed to meet the needs of a unique situation

- Standing-Plans: ongoing plans that provide guidance for activities performed repeatedly

Developing Plans Three contingency factors affect the choice of plans: 1. Organizational Level: lower-level managers do operational planning, while

upper-level managers do strategic planning. 2. Degree of Environmental Uncertainty: when uncertainty is high, plans

should be specific but flexible. 3. Length of Future Commitments: plans should extend far enough to meet

the commitments made when the plans were developed. Planning for too long or too short a time period is inefficient and ineffective.

Approaches to Planning 1. Formal Planning

- A group of planning specialists whose sole responsibility is helping to write organizational plans

- Usually applied in larger organisations - Specific goals covering a period of years are defined. - Goals are written down (to reduce ambiguity) and shared with

organisation members (to create a common understanding about what needs to be done).

- The organisation and various work units take a clearly defined path

2. Informal Planning - Often done in small businesses and is carried out by the owner-

manager who has the vision of where they want to business to go and how to get there.

- Nothing is written down - Little or no sharing of goals with others - General and lacks continuity

Criticism of Planning • Planning may create rigidity: managers cant cope with a changed

environment • Plans cant be developed for a dynamic environment: todays environment

is random and unpredictable • Formal plans can’t replace intuition and creativity: routine-planning efforts

may impede someone’s innovative vision. • Planning focuses managers’ attention on today’s competition, not on

tomorrow’s survival: may not allow managers to consider creating or reinventing an industry

• Formal planning reinforces success, which may lead to failure: may provide a false sense of security

Effective Planning in Dynamic Environments • Managers should develop plans that’s are specific and flexible • Managers need to recognize that planning is an ongoing process • Managers should be ready to change directions if environmental

conditions warrant • Managers need to stay alert to environmental changes that may affect

implementation and respond as need • Managers should teach their employees how to set goals and to plan and

then trust them to do it

Goals Types of Goals • Multiple

- Provide a place for worship - Provide shelter and food

• Stated - Official statements of what an organisation says & what it wants its

various stakeholders to believe • Real

- Goals that an organisation actually pursues, as defined by the actions of its members

Approaches to Setting Goals 1. Traditional Goal Setting

– Goals are set at the top level of the organisation and then broken down into subgroups for each level of the organisation

– Traditional goal setting assumes that top managers know what is best because of their ability to see the “big picture.”

– Employees are to work to meet the goals for their particular area of responsibility.

– This traditional approach requires that goals must be made more specific as they flow down to lower levels in the organization.

– In striving to achieve specificity, however, objectives sometimes lose clarity and unity with goals set at a higher level

2. Means-Ends Chain

– An integrated network of goals, higher level goals (or ends) are linked to lower level goals which serves as the means to achieve outcomes

– This is actually how traditional goal setting should work but doesn’t necessarily

– For this to work from traditional goal setting: the organisation goal has to be clearly defined

– Each department and lower level goals also have to be clear in order to achieve the overall organisation’s goal.

3. Management By Objectives (MBO)

– Setting mutually agreed upon goals and using those to evaluate employee performance

– Four elements to MBO: I. Goal specificity II. Participative decision making III. Explicit time frame

IV. Performance feedback Characteristics of Well-Designed Goals • Clear with timeframe • Written in terms of outcomes, not actions • Measurable and quantifiable • Written down • Communicated to all who need to know • Challenging yet attainable Decision Making • Decision making is the ‘process of choosing between alternatives’ • Decision making is a vital part of the manager’s role • Decisions are made about:

- Planning: deciding objectives - Organising: allocating resources - Leading: deciding how and when to motivate people - Controlling: deciding how to measure outcomes and performance

The Decision-Making Process 1. Step 1: Identifying a Problem

- A problem is a discrepancy between an existing and desired state of affairs

- Problem may not be obvious

2. Step 2: Identifying Decision Criteria - Criteria relevant in making a decision

3. Step 3: Allocating Weights to the Criteria

- When the criteria identified in Step 2 does not hold equal importance, prioritize the criteria

4. Step 4: Developing Alternatives

- List creative alternatives 5. Step 5: Analyzing Alternatives

- Appraise against the criteria established in Step 2 - Identify strengths and weaknesses - Assessment can be both objective and subjective - However, should establish a score for each alternative against

established criteria and weighting 6. Step 6: Selecting an Alternative

- Select the alternative that generated the highest score 7. Step 7: Implementing the Alternative

- Putting into action - Re-assess the environment

8. Step 8: Evaluating Decision Effectiveness

- Desired result achieved? Managers Making Decisions • Rationality:

- Managerial decision making is assumed to be rational - Rational decisions describe choices that are consistent and value-

maximizing within specified constraints - In an organization, rational decision’s made by managers/employees

“maximize” economic benefit for the organization - Assumptions of rationality:

o The problem is clear and unambiguous o A single, well-defined goal is to be achieved o All alternatives and consequences are known o Preferences are clear o Preferences are constant and stable o No time or cost constraints exist o Final choice will maximise payoff

• Bounded Rationality:

- Decision-making that’s rational but limits (bounded) by an individual’s ability to process information.

- Bounded by the limitations and constraints, managers attempt to behave rationally

• The Role of Intuition

- Intuitive division making is making decisions on the basis of experiences, feelings and accumulated judgment.

- Intuition consists of: o Experience-based decisions: managers make decisions based

on their past experiences o Affect-initiated decisions: managers make decisions based on

feelings or emotions o Cognitive-based decisions: managers make decisions based on

skills, knowledge and training o Subconscious mental processing: managers use data from their

subconscious mind to help them make decisions o Values or ethics-based decisions: managers make decisions

based on ethical values or culture Types of Problems

• Structured Problem:

- A straightforward, familiar and easily defined problem - This is usually addressed by procedures/rules in place. - E.g. Customer’s meal is cold

• Unstructured Problem:

- A problem that is new or unusual and for which information is ambiguous or incomplete – we don’t know how to solve it straight away.

- E.g. Restaurant damaged by fire Type of Decisions • Programmed Decision:

- A repetitive decision (you do it regularly) that can be handled using a routine approach – same approach or is decision we make regularly.

- E.g. Apologise and get a new one

• Nonprogrammed Decision: - A unique and nonrecurring decision that requires a custom-made

solution – don’t often or never have had to make this type of decision before.

- E.g. Set up temporarily elsewhere

Control

What is Controlling, and why is it Important? • Controlling is the process of monitoring, comparing and correcting work

performance. • Why control?

– It is the final link in the management functions. – The only way managers know whether organisational goals are

being met and, if not, the reasons why. – Employee empowerment – Encourages managers’ to delegate – Protects the organisation and its assets

The Control Process Step 1: Measuring • To determine what actual performance is, a manager must first get

information about it.

• How we measure: personal observation, statistical reports, oral reports, and written reports. Using a combination increases both the number of input sources and the probability of getting reliable information.

• What we measure: Control criteria (most are quantitative such as employee satisfaction, turnover, absenteeism rates, budgets) and objective and subjective measures (non-numbers)

Step 2: Comparing • The comparing step determines the variation between actual performance

and a standard. • It critical to determine an acceptable range of variation • Deviations outside this range need attention

Step 3: Taking Managerial Action • Do nothing: no need to do anything as the performance is within the

range of variation • Correct actual performance:

- Immediate corrective action: corrects performance straight away to get back on track e.g. found employee stealing – discipline straight away

- Basic corrective action: Can take time to look at how and why performance differs then corrects it e.g. Someone is stealing, don’t know who, advise employees we are aware of this and install security cameras to monitor.

• Revise the standard: - Is our goal too high? Or is it too low?

Controlling for Organizational Performance What is Organizational Performance? • Control is critical to monitor, manage and improve organisation

performance. • Organizational performance is the accumulated results of an

organization’s work activities to ensure: - Better asset management: ‘Acquiring, managing, renewing &

disposing of assets when needed’. - Increased ability to provide customer value through feedback,

managers know how to improve to please customers - Impact on organisational reputation

Measures of Organizational Performance

• Organizational productivity: the amount of goods or services produced divided by the inputs needed to generate the output.

• Organizational effectiveness: a measure of the appropriateness of organizational goals and how well those goals are being met.

• Industry and company rankings: rankings are determined by specific performance measures, which are different for each list.

Tools for Measuring Organizational Performance Feedforward, Concurrent and Feedback Control • Feedforward Control: the most desirable type of control that prevents

problems because it takes place before the actual activity. The problems can be prevented rather than require any correction after any damage has been done. However, feedforward control requires timely and accurate information that isn’t done.

• Concurrent Control: takes place while a work activity is in progress. All managers can benefit as it can help them correct problems before they become too costly.

• Feedback Control: the most popular type of control that takes place after the activity is done. Feedback gives managers meaningful information about how effective their planning efforts have been and can also enhance motivation.

Financial Controls • Every business wants to earn a profit and to achieve this goal managers

need financial controls. • Traditional financial control measures:

- Profitability - Budgets - Audits

• Managing Earnings: when organizations ‘manage’ earnings, they ‘time’ income and expenses to enhance current financial results, which gives an unrealistic picture of the organization’s financial performance.

The Balanced Scorecard Approach • Balanced scorecard is a performance measurement tool that looks at

more than just financial perspective. • A balanced scorecard typically looks are four areas:

- Finances - Customers - Internal processes - People/innovation/growth assets

• Managers should develop goals for each area

• Monitor the performance against the goals and take action as needed Information Control • Managers deal with information controls in two ways:

- As tools to help them control other organizational activities - As organizational areas they need to control

• How information is used in controlling: - To monitor and measure organizational activities and performance - To help determine whether deviations are acceptable - To help develop appropriate courses of action

• A management Information System (MIS) is a system used to provide managers with needed information on a regular basis. It is a tool to help managers control other organisational activities.

• Managers need to control data encryption, system firewalls, data backups Benchmarking of Best Practices • Benchmarking is the search for best practises amongst competitors or

non-competitors that lead to superior performance • The goal is benchmarking is to identify various benchmarks, which are

standards of excellence against which to measure and compare. • Can be used to help identify specific performance gaps and potential

areas of improvement. • Suggestions for Internal Benchmarking:

- Connect best practices to strategies and goals - Identify best practices throughout the organization - Develop best practices reward ad recognition systems - Communicate best practices throughout the organization - Create a best practices knowledge-sharing system - Nurture best practices on an ongoing basis

Steps in the Benchmarking Process 1. Determining benchmark focus 2. Plan & research 3. Gather data 4. Analyse data 5. Develop recommendations 6. Implement 7. Continual improvement Contemporary Issues about Control in the Workplace • Workplace privacy vs. workplace monitoring

- E-mail, telephone, computer, and Internet usage

- Productivity, harassment, security, confidentiality, intellectual property protection

• Control measures: - Enforce workplace monitoring policies - Employees need to be informed that their computer usage may be

monitored at any time - Provide acceptable use guidelines

• Employee theft - The unauthorized taking of company property by employees for their

personal use • Workplace violence

- Anger, rage, and violence in the workplace is affecting employee productivity and employers may be sued for poor workplace environments

Leadership

Who are Leaders, and what is Leadership? • A leader is someone who can influence others who may or may not

possess managerial authority • Leadership is the process of influencing a group to achieve goals Early Leadership Theories Trait Theories • Early leadership research focused on isolating leader traits that would

differentiate leaders from non-leaders. • Some of the traits studied included physical stature, appearance, social

class, emotional stability, fluency of speech and sociability. • Despite the best efforts of researchers it proved impossible to identify a

set of traits that would always differentiate a leader from a non-leader. • Researchers eventually recognized that traits alone were not sufficient for

identifying effective leaders. • Therefore, leadership then concentrated on the preferred behavioural

styles that leaders demonstrated. Behavioural Theories • Trait theories did not accurately predict the ‘right’ people for leadership

roles • Leadership is more than possessing a few generic traits • Based on the idea that once the best style of leadership was identified,

leaders could be trained

• Limitations of Behavioural Leadership Theories: – No consistent relationship between leadership behaviour and

performance indicators of production, efficiency and satisfaction – Predicting leadership success is more complex than isolating a few

leader traits or preferable behaviours – No consideration of situational factors

Behavioural Dimension Conclusion University of Iowa

- Democratic Style: involving subordinates, delegating authority, and encouraging participation

- Autocratic Style: dictating work methods, centralizing decision making, and limiting participation

- Laissez-Faire Style: giving group freedom to make decisions and complete work

Democratic style of leadership was most effective, although later studies showed mixed results.

Ohio State - Consideration: being considerate of followers’ ideas and feelings

- Initiating Structure: structuring work and work relationships to meet job goals

Leaders who were high in consideration and high in initiating structure achieved high subordinate performance and satisfaction, but not in all situations

University of Michigan

- Employee Oriented: emphasized interpersonal relationships and taking care of employees’ needs

- Production Oriented: emphasized technical or task aspects of job

Employee-oriented leaders were associated with high group productivity and high job satisfaction

Managerial Grid

- Concern for People: measured leader’s concern for subordinates on a scale of 1 to 9 (low to high)

- Concern for Production: measured leader’s concern for getting job done on a scale od 1 to 9 (low to high)

Leaders performed best when they had high concern for production and high concern for people

Contingency Theories of Leadership • Effective leadership requires more than an understanding of traits and

behaviours

• Ability to ‘read’ and ‘adapt’ to situational circumstances as important

The Fielder Model • The Fiedler Contingency model is a leadership theory, which proposed

that effective group performance depended on the proper match between a leader’s style, and the degree to which the situation allowed the leader to control and influence.

• The model was based on the premise that a certain leadership style would be most effective in different types of situations.

• The keys were to: 1. Define those leadership styles and the different types of situations 2. Identify the appropriate combinations of style and situation

Hersey and Blanchard’s Situational Leadership Theory • Situational leadership theory (SLT) is a leadership contingency theory that

focuses on followers’ readiness. • SLT uses the same two leadership dimensions that Fiedler identifies: ask

and relationship behaviours. • However, Hersey and Blanchard go a step further by considering each as

either high or low and then combining then into four specific leadership styles: - Telling (high task-low relationship): the leader defines roles and tells

people what, how, when, and where to do various tasks. - Selling (high task-high relationship): the leader provides both directive

and supportive behaviour. - Participating (low task-high relationship): the leader and followers

share in decision-making; the man role of the leader is facilitating and communicating.

- Delegating (low task-low relationship): the leader provides little direction or support.

• The final component in the SLT model is the four stages of follower readiness: - R1: people are both unable and unwilling to take responsibility for

doing something. Followers aren’t competent or confident. - R2: people are unable but willing to do necessary job tasks. Followers

are motivated but lack the appropriate skills. - R3: people are able but unwilling to do what the leader wants.

Followers are competent but don’t want to do something. - R4: people are both able and willing to do what is asked of them.

• As followers reach higher levels of readiness, the leader responds not only by decreasing control over their activities but also by decreasing behaviours.

Path-Goal Theory

• Path-goal theory is a leadership theory that says the leader’s job is to assist followers in attaining their goals and to provide direction or support needed to ensure that their goals are compatible with the goals of the group or organization.

• Path-goal theory consists of four leadership behaviours: - Directive leader: the leader lets subordinates know what’s expected of

them. Schedules work to be done, and gives specific guidance on how to accomplish tasks

- Supportive leader: the leader shows concern for the needs of followers and is friendly

- Participative leader: the leader consult with group members and uses their suggestions before making a decision

- Achievement oriented leader: the leader sets challenging goals and expects followers to perform at their highest level

Contemporary Views of Leadership Transactional Leadership • Leaders that lead primarily by using social exchanges (or transactions) • Transactional leaders guide or motivate their followers to work towards

established goals by exchanging rewards for their productivity Transformational Leadership • Leaders who stimulate and inspire followers to achieve extraordinary

outcomes • They pay attention to the concerns and development needs of individual

followers • Transformational leadership develops from transactional leadership. • Attempts to instil in followers the ability to question not only established

views but views held by the leader. • Strongly correlated with:

- Lower turnover rates - Higher levels of productivity, employee satisfaction, creativity, goal

attainment and follower well-being Transactional vs. Transformational Transactional Transformational • Set task goals • Provide appropriate resources • Reward performance • Keep operations running

smoothly •

• Produces high levels of employee effort and performance

• More effective • Higher performers • More promotable • More interpersonally sensitive

• Challenge current practices • Inspire a shared vision • Enable others to act • Lead by example

Leadership Issues in the Twenty-First Century Managing Power • The capacity of a leader to influence work actions or decisions is

dependent upon the following sources of power: – Legitimate: The power a leader has as a result of his or her position.

“Because I am the boss, you must do as I ask.” – Coercive: The power a leader has to punish or control. “If you don’t do

what I ask, I’ll punish you.” – Reward: The power to give positive benefits or rewards. “If you do

what I ask, I’ll give you a reward.” – Expert: The influence a leader can exert as a result of his or her

expertise, skills, or knowledge. “You’ll do as I ask because I know what to do.”

– Referent: The power of a leader that arises because of their desirable resources or admired personal traits. “ You’ll do as I ask because you like/admire me.

Motivating

What is Motivation? • Motivation refers to a process by which a person’s efforts are energised,

directed and sustained towards attaining a goal. • This definition has three key elements:

- Energy: a measure of intensity or drive - Direction: toward organizational goals - Persistence: effort to achieve those goals

• Workers are most motivated when individual needs are compatible with organisational goals

Early Theories of Motivation • Understand how individuals differ and what can be offered to satisfy their

needs. Maslow’s Hierarchy of Needs

• The hierarchy of needs there is Maslow’s theory that there is a hierarchy of five human needs: - Physiological needs: a person’s need for food drink, shelter, sexual

satisfaction, and other physical needs - Safety Needs: a person’s needs for security and protection from

physical and emotional harm - Social Needs: a person’s needs for affection, belongingness,

acceptance, and friendship - Esteem Needs: a person’s needs for internal factors, such as self-

respect, autonomy, and achievement, and external factors, such as status, recognition and attention

- Self-Actualization Needs: a person’s needs for growth, achieving one’s potential, and self-fulfilment; the drive to become what one is capable of becoming

• Maslow argued that each level in the needs hierarchy must be substantially satisfied before the next need becomes dominant.

• An individual moves up the needs hierarchy from one level to the next. • In addition Maslow separated the five needs into:

- Lower-Order Needs: physiological and safety needs - High-Order Needs: social, esteem and self-actualization needs

McGregor’s Theory X and Theory Y • McGregor is best known for proposing two assumptions about human

nature: - Theory X: the assumption that employees dislike work, are lazy, avoid

responsibility, and must be coerced to perform - Theory Y: the assumption that employees are creative, enjoy work,

seek responsibility, and can exercise self-direction • McGregor believed that Theory Y assumptions should guide management

practice and proposed that participation in decision making, responsible and challenging jobs, and good group relations would maximize employee motivation.

Herzberg’s Two-Factor Theory • Two-factor theory is Herzberg’s motivation theory, which proposes that

intrinsic factors are related to job satisfaction and motivation, whereas extrinsic factors are associated with job dissatisfaction.

• When people felt good about their work, they tended to cite intrinsic factors arising from the job itself, such as achievement, recognition, and responsibility.

• When they were dissatisfied, they tended to cite extrinsic factors arising from the job context, such as company policy and administration, supervision, interpersonal relationships, and working conditions.

• Herzberg believed that the factors that led to job satisfaction were separate and distinct from those that led to job dissatisfaction.

• He called the extrinsic factors that create job satisfaction hygiene factors. When these factors are adequate, people won’t be dissatisfied, but wont be satisfied (or motivated) either.

• To motivate people, Herzberg suggested emphasizing motivators, intrinsic factors having to do with the job itself.

McClelland’s Three-Needs Theory • Three-needs strategy is McClelland’s motivation theory, which says that

three acquired (not innate) needs are major motives in work.: - Need for Achievement (nAch): the drive to succeed and excel in

relation to a set of standards - Need for Power (nPow): the need to make others behave in a way that

they would not have behaved otherwise. - Need for Affiliation (nAff): the desire for friendly and interpersonal

relationships. • McClelland showed that employees can be trained to stimulate their

achievement need by being in situations where their have personal responsibility, feedback, and moderate risks.

• The best managers tend to be high in the need for power and low in the need for affiliation.

Contemporary Theories of Motivation • Focuses on why people choose to behave in certain ways and their

reasons for reacting as they do. • Help understand how motivation is energised and sustained. Goal-Setting Theory • Goal-setting theory is the proposition that specific goals increase

performance and that difficult goals, when accepted, result in higher performance that do easy goals.

• Three contingency theories influence the goal-performance relationship: - Goal Commitment: when goals are made public and when goals are

self-set rather than defined - Self-Efficacy: an individual’s belief that he or she is capable of

performing a task - National Culture: subordinates with be reasonably independent, that

people will seek challenging goals, and that performance in considered important by both managers and subordinates

Reinforcement Theory

• Reinforcement theory is the theory that behaviour is a function of its consequences.

• Consequences that immediately follow a behaviour and increase the probability that the behaviour will be repeated are called reinforces.

• Reinforcement theory focuses solely on what happens to a person when he or she does something.

• Using reinforcement theory, managers can influence employees’ behaviour by using positive reinforces for actions that help the organization achieve its goals.

Equity Theory • Equity theory is the theory that an employee compares what they get from

a job (outcomes) in relation to what they put into it (inputs) and then compare their inputs:outcomes ration with the input:outcomes ratio of relevant others.

• Inputs are what employees put into their jobs: time, effort, ability, loyalty, commitment etc.

• Output is what employees get from their jobs: pay, bonus, perks, security, praise etc.

• People become demotivated and reduce input and/or seek change or improvement whenever they feel their inputs are not being fairly rewarded by their outputs.

• If an employee perceives her ratio to be equitable in comparison to those of relevant others, there’s no problem.

• However, if the ratio is inequitable, employee views themselves as underrewarded or overrewarded.

Expectancy Theory • Expectancy theory is the theory that an individual tends to act in a certain

way, based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual.

• It includes three variables, or relationships: - Expectancy or Effort-Performance Linkage: the probability perceived by

an individual that exerting a given amount of effort will lead to a certain level of performance

- Instrumentally or Performance-Reward Linkage: the degree to which an individual believes that performing at a particular level is instrumental in attaining the desired outcome

- Valence or Attractiveness of Reward: the importance that an individual places on the potential outcome or reward that can be achieved on the job

• Expectancy theory emphasizes that the rewards an organization is offering must align with individual wants.

Suggestions for Motivating Employees • Recognise individual differences • Match people to jobs • Use goals to challenge employees • Ensure that goals are perceived as attainable • Individualise rewards • Link rewards to performance • Ensure the system is equitable • Use recognition • Show care and concern for your employees • Don’t ignore money

Organizing

Designing Organizational Structure • Organising is arranging and structuring work to accomplish organisational

goals. • Organizing is important for managers because:

– An appropriate structure allows employees to effectively and efficiently do their work while accomplishing organisational goals and objectives.

– This results in the development of an organisational structure, which is the formal framework by which job tasks are divided, grouped and coordinated.

• Organizational Structure is the formal arrangement of jobs within an organization

• Organizational Design is the creating or changing of an organization’s structure

Work Specialization • Work specialization is dividing work into separate job tasks. • Individual employees specialize in doing part of an activity rather than the

entire activity in order to increase work output. • Job broken down into small, simple, and separate operations in which

each worker could specialise • People can learn skills and become an expert at their individual job

functions • Job variety makes it possible for people to choose, or be assigned to

positions they will enjoy for which they are well suited • However, when it is carried to extremes, work specialization can lead to

boredom, fatigue, stress, poor quality, increased absenteeism, reduced performance and increased turnover.

Departmentalization • Departmentalisation is the basis on which jobs are grouped together • There are five common forms of departmentalization

- Functional: by functions performed (Engineering, accounting, manufacturing etc.)

- Geographic: by geographic location (Sales WA, Sales VIC, Sales SA etc.)

- Product: by product line (Casual wear, formal wear, uniforms etc.) - Process: by product or customer flow (Cutting, embroidery, sewing,

picking, packaging etc.) - Customer: by specific customer (Retail, wholesale, government etc.)

• Since getting and keeping customers is essential for success, departmentalization is used increasingly as it emphasizes monitoring and responding to changes in customers’ needs.

Chain of Command • Chain of command is the line of authority extending from upper

organisational levels to the lowest levels, which clarifies who reports to whom.

• To understand what chain of command is, one had to understand three other concepts: - Authority: the rights inherent in a managerial position to tell people

what to do and to expect them to do it. - Responsibility: the obligation or expectation to perform any assigned

duties - Unity of command: the management principle that each person should

report to only one manager • However, these concepts are far less important today due to information

technology. Span of Control • Span of control is the number of subordinates managers can efficiently

and effectively manage. • The span of control determines the number of levels and managers in an

organization and how efficient an organization will be. • The wider or larger the span, the more efficient it is. • However, at some point, wider spans may reduce effectiveness if

employee performance worsens because managers no longer have time to lead.

• The recent trend has been towards larger spans of control as managers are beginning to recognize that they can handle a wider span when employees know their jobs well and when those employees understand organizational processes.

Centralization and Decentralization • Centralization is the degree to which decision-making is concentrated at

upper levels of the organization. • If top managers make key decisions with little input from below, then the

organization is more centralized. • This is where there is a stable environment, inexperienced lower-level

managers, significant decisions, organization is facing a crisis • On the other hand, decentralization is the degree to which lower level

employees provide input or actually make decisions. • This is where there is a complex environment, experienced lower-level

managers, minor decisions, organization is geographically displaced\ • As organizations have become more flexible and responsive to

environmental trends, there’s been a distinct shift toward decentralized decision-making.

Formalization • Formalisation is how standardized an organization’s jobs are and the

extent to which employee behavior is guided by rules and procedures. • In highly formalized organizations, there are explicit job descriptions,

numerous organizational rules, and clearly defined procedures covering work processes. For example, military personnel, fast-food employees

• However, when formalization is low, employees have more discretion in how they do their work. For example, journalists, academics

• The recent trend is that organizations are less reliant on rules and standardisation.

Mechanistic and Organic Structures Two Models of Organizational Design • A mechanistic organization is an organization design that’s rigid and tightly

controlled. • A mechanistic organization has:

- High specialisation - Rigid departmentalisation - High chain of command - Narrow spans of control - High formalisation - Centralised

• Mechanistic organizations strive for efficiency and rely heavily on rules, regulations, standardized tasks, and similar controls.

• This design tries to maximize the impact of differing personalities, judgments, and ambiguity because these human traits are seen as inefficient and inconsistent.

• The other organizational design model is an organic organization, which is an organizational design that’s highly adaptive and flexible.

• An organic organization has: - Cross functional teams - Cross hierarchical teams - Free flow of information - Wide spans of control - Low formalisation - Decentralised

• In this deign, employees are highly trained and empowered to handle diverse activities and problems, and they require minimal formal rules and little direct supervision.

Contingency Factors • Strategy an Structure: Three dimensions:

- Innovation (organic) - Cost minimisation (mechanistic) - Imitation (both)

• Size and Structure: Organic to mechanistic with growth • Technology and Structure: Three categories reflect increasing levels of

complexity and sophistication: - Unit (organic) - Mass (mechanistic) - Process (organic)

• Environmental Uncertainty and Structure: - Stable environment (mechanistic) - Uncertainty (Organic)

Common Organizational Designs Traditional Organizational Designs. • Simple Structure:

- An organizational design with low departmentalization, wide spans of control, centralized authority, and little formalization.

- Strengths: fast, flexible, inexpensive to maintain and clear accountability

- Weaknesses: not appropriate as organization grows and reliance on one person is risky

• Functional Structure: - An organizational design that groups together similar or related

occupational specialties. - Strengths: cost-saving advantages from specialization and employees

are grouped with others who have similar tasks

- Weaknesses: pursuit of functional goals can cause managers to lose sight of what’s best for the overall organization and functional specialists become insulated and have little understanding of what other units are doing

• Divisional Structure: - An organizational structure made up of separate, semiautonomous

units or divisions. - Strengths: focuses on results as division managers are responsible for

what happens to their products and services - Weaknesses: duplication of activities and resources increases costs

and reduces efficiency

External and Internal Environments

The Manager: Omnipotent or Symbolic The Omnipotent View • The omnipotent view of management is the view that managers are

directly responsible for an organisation’s success or failure. • The quality of the organisation is determined by the quality of its

managers. • In the omnipotent view, someone has to be held accountable when

organizations perform poorly, regardless of the reasons, and that “someone” is the manager.

• Managers are held accountable for an organisation’s performance yet it is difficult to attribute good or poor performance directly to their influence on the organisation.

The Symbolic View • The symbolic view of management is the view that much of an

organisation’s success or failure is due to external forces outside of the manager’s control.

• According to this view its unreasonable to expect managers to significantly affect an organization’s performance.

• Instead, performance is influenced by factors manager don’t control, such as the economy, customers, governmental policies, competitors, industry conditions, technology and the actions of previous managers.

• Managers symbolise control and influence through their action. Organizational Culture What is Organizational Culture?

• Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act.

• There are seven dimensions that describe an organization’s culture: - Attention to Detail: degree to which employees are expected to exhibit

precision, analysis, and attention to detail - Outcome Orientation: degree to which managers focus on results or

outcomes rather than on how these outcomes are achieved - People Orientation: degree to which management decisions take into

account the effects on people in the organization - Team Orientation: degree to which work is organized around teams

rather than individuals - Aggressiveness: degree to which employees are aggressive and

competitive rather than cooperative - Stability: degree to which organizational decisions and actions

emphasize maintaining the status quo - Innovation and Risk Taking: degree to which employees are

encouraged to be innovative and to take risks’ • Each of the seven dimensions ranges from low to high, meaning its not

very typical of the culture (low) or it is very typical of the culture (high). Strong Cultures • Strong cultures are organizational cultures in which key values are

intensely held and widely shared. • The more employees accept the organization’s key values and the greater

their commitment to those values, the stronger the culture. • It is important to have a strong culture, as employees are more loyal,

there is high organizational performance. • However, strong culture might prevent employees from trying new

approaches Strong Cultures Weak Cultures • Values widely shared • Culture conveys consistent

messages about what’s important

• Most employees can tell stories about company history/heroes

• Employees strongly identify with culture

• Strong connection between shared values and behaviours

• Values limited to a few people-usually top management

• Culture send contradictory messages about what’s important

• Employees have little knowledge of company history or heroes

• Employees have little identification with culture

• Little connection between shared values and behaviours

Where Culture Comes From and How it Continues

• Organizational culture comes from: - The organization’s founder - Vision and mission - Past practices of the organization - The way things have been done - Behavior of top management

• The original source of the culture usually reflects the vision of the founders.

• When the culture is in place, certain organizational practices help maintain it.

• The actions of top managers also have a major impact on the organization’s culture.

• Finally, organizations help adapt to the culture through socialization. This is a process that helps new employees adapt to the organization’s culture. Socialization helps employees: - Reduce their psychological distress - Learn the values which guide expected behaviours - Orient themselves to the achievement of desirable organisational ends

The Environment Defining the External Environment • The external environment is factors and forces outside an organization

that affects the organization’s performance. • The external environment includes two components:

- Specific Environment: external factors that have a direct impact on managers’ decisions and actions an are directly relevant to the achievement of an organization’s goals

- General Environment: Broad external conditions that may affect an organization

Specific Environment • Customers: absorbs the organisation’s outputs • Suppliers: organisations that provide materials, financial and labour

inputs. • Competitors: other organisations that produce similar or substitute goods

and services • Pressure groups/government agencies: special interest groups that

attempt to influence the actions of organisations General Environment • Economic: overall status of the economic system in which the

organisation operates. For example, interest rates, inflation, changes in disposable income and share market fluctuations

• Political/legal: regulations and policies that limit what the organisation can and cannot do. For example, environmental protection laws and anti-discrimination laws

• Socio-cultural: consists of customs, values, tastes of the societies in which an organisation operates. For example, work life balance, flexible working hours, increasing concerns about global warming

• Technological: methods available for converting resources into products or services. For example, automation, internet, computer software

• Demographic: trends in the physical characteristics of a population. For example, age, level of education, geographic location, income, family composition

• Global conditions: For example, work life balance, flexible working hours, increasing concerns about global warming

How the Environment Affects Managers • Stakeholders are any constituencies in an organization’s environment that

are affected by the organization’s decisions and actions. • The more obvious and secure stakeholder relationships are, the more

influence managers will have over organizational outcomes. • A manager should care about managing stakeholder relationships

because: - Can lead to desirable organizational outcomes, such as improved

predictability of changes, more successful innovations, greater trust and flexibility and organisational performance

- It’s the ‘right’ thing to do. Because an organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services), managers should consider their interests as they make decisions.

• A managers can manage stakeholder relationships by: - Identifying the organization’s stakeholders - Determine what particular interests or concerns the stakeholders

might have - Decide how critical each stakeholder is to the organization’s decisions

and actions - Determine how to manage the external stakeholder relationships.