management thought
TRANSCRIPT
Management Theory
Management Thought
ERWIN ABAD
DEPARTMENT OF HEALTH – FINANCE SERVICE
RAMON A VICTOR, Ph.D.
FEBRUARY 7, 2013
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Table of Contents
I. Executive Summary 1
II. The Classical School
Scientific Management 5
Bureaucratic Management 10
Administrative Management 13
Limitations of the Classical School 20
III. The Behavioral School
Human Relations 24
Behavioral Science 26
IV. The Modern Management School
Decision Theory 29
Management Science and MIS 30
Production and Operations Management 33
Systems Theory 34
Contingency Theory 40
Bibliography
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Executive Summary
Awareness and understanding of important historical developments are
also important to managers. The history of management theories helps
managers by organizing information and providing a systematic
framework for action.
The concept of management is not new; it has been practiced for
thousands of years, although terms such as management principles or
management theory may not have been used. The Sumerians, the
Babylonians, or the Romans have provided numerous illustrations of
effective management. In terms of longevity, "the most effective formal
organization in the history of Western civilization has been the Roman
Catholic Church" (Harold Koontz and Cyril O'Donnell). However,
management gained in importance, as mankind progressed and moved
into the Industrial Revolution era.
Today's concept of management is the product of a long and
complicated evolutionary process. Essentially, four major forces affect
management are economic, social, political-legal, and technological.
Most thought of practice of management are needed to be refined and
synthesized to call them management principles. The early “autocratic
period” of management is characterized by the use of absolute
authority, coercion and force, with strategies like “fear of God”. The
history of Management as a discipline is traced from the 19th century.
Development of a unified and integrated management theory out of the 3
management theory “jungle” has some difficulties like applied science
nature of the subject, lack of coherent theoretical concepts of its own
and heavy reliance on concepts borrowed from other disciplines.
A number of more or less separate schools of management thought
have emerged since the end of the 19th century and each sees
management from its own viewpoint. There are many ways of
classifying these theories or schools. One broad way of grouping
management theories is to group them as classical, behavioral/ neo-
classical and modern management schools.
The classical management theory is referred to the period between
1880s to 1920s. This phase consists of Scientific management of F.W.
Taylor and his followers, Administrative management of Henry Fayol
and others and Bureaucratic organization of Max Weber. The classical
theory emphasized the economic rationality of management and
organization and suggested to determine the best way to perform a job.
This theory is criticized for its assumption that people are motivated
primarily by economic reward.
The Behavioral or Neo-classical theory, which is identified with the
period from 1920s to 1950s, is concerned with the human oriented
approach and emphasized the needs, drives, behaviors and attitudes
of people. The human relations schools together with (early) behavioral
schools constitute this group. The social person view of employees is
the basis of this set of schools. The famous Hawthorne experiment
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conducted by Mayo, Roethlisberger and Dickson is a milestone in the
endeavors of this school. Several behavioral scientists including
Maslow, McGregor and Herzberg have contributed to this school as
well as to production and operations management under the modern
management theory. This school is criticized for its overemphasis on
human variables and symbolic rewards which may not be well
appreciated by the recipients.
The complex employee view has become the basis of modern
management theory, which began around 1950s. This group tried to
test the views of earlier schools and accept them selectively. In the
process it has made use of many tools like computers and
mathematical techniques and theories from other disciplines like
systems theory, decision theory, contingency theory and management
science.
There are many more names of schools and classifications of
management thoughts in the literature of management, but most of
them overlap one another.
Over the years, disagreement on exactly how many different
approaches to management exist and what each approach entails has
been common.
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The schools of management thought are theoretical frameworks for the
study of management. Each of the schools of management thought are
based on somewhat different assumptions about human beings and
the organizations for which they work. Since the formal study of
management began late in the 19th century, the study of management
has progressed through several stages as scholars and practitioners
working in different eras focused on what they believed to be important
aspects of good management practice. Over time, management
thinkers have sought ways to organize and classify the voluminous
information about management that has been collected and
disseminated. These attempts at classification have resulted in the
identification of management schools.
Disagreement exists as to the exact number of management schools.
Different writers have identified as few as three and as many as twelve.
The formal study of management is largely a twentieth-century
phenomenon, and to some degree the relatively large number of
management schools of thought reflects a lack of consensus among
management scholars about basic questions of theory and practice.
THE CLASSICAL SCHOOL
The classical school is the oldest formal school of management
thought. Its roots pre-date the twentieth century. The classical school of
thought generally concerns ways to manage work and organizations
more efficiently. Three areas of study that can be grouped under the 6
classical school are scientific management, administrative
management, and bureaucratic management.
SCIENTIFIC MANAGEMENT
In the late 19th century, management decisions were often arbitrary
and workers often worked at an intentionally slow pace. There was little
in the way of systematic management and workers and management
were often in conflict. Scientific management was introduced in an
attempt to create a mental revolution in the workplace. It can be
defined as the systematic study of work methods in order to improve
efficiency. Frederick W. Taylor was its main proponent. Other major
contributors were Frank Gilbreth, Lillian Gilbreth, and Henry Gantt.
Scientific management has several major principles. First, it calls for
the application of the scientific method to work in order to determine
the best method for accomplishing each task. Second, scientific
management suggests that workers should be scientifically selected
based on their qualifications and trained to perform their jobs in the
optimal manner. Third, scientific management advocates genuine
cooperation between workers and management based on mutual self-
interest. Finally, scientific management suggests that management
should take complete responsibility for planning the work and that
workers' primary responsibility should be implementing management's
plans. Other important characteristics of scientific management include
the scientific development of difficult but fair performance standards
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and the implementation of a pay-for-performance incentive plan based
on work standards.
Scientific management had a tremendous influence on management
practice in the early twentieth century. Although it does not represent a
complete theory of management, it has contributed to the study of
management and organizations in many areas, including human
resource management and industrial engineering. Many of the tenets
of scientific management are still valid today.
The classical scientific branch arose because of the need to
increase productivity and efficiency. The emphasis was on trying to find
the best way to get the most work done by examining how the work
process was actually accomplished and by scrutinizing the skills of the
workforce.
Frederick Taylor is often called the “father of
scientific management.” Taylor began work
at the age of 18 as a machinist apprentice to a
pattern-maker. He later joined the Midvale
Steel Company as a laborer and became
chief engineer in eight years. During his
period at the steel mill Taylor performed
comprehensive experiments on worker productivity and tested what he
called the "task system," later developed into the Taylor System and
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eventually progressed into scientific management. Taylor believed that
organizations should study tasks and develop precise procedures. As
an example, in 1898, Taylor calculated how much iron from rail cars
Bethlehem Steel plant workers could be unloading if they were using
the correct movements, tools, and steps. The result was an amazing
47.5 tons per day instead of the mere 12.5 tons each worker had been
averaging. In addition, by redesigning the shovels the workers used,
Taylor was able to increase the length of work time and therefore
decrease the number of people shoveling from 500 to 140. Lastly, he
developed an incentive system that paid workers more money for
meeting the new standard. Productivity at Bethlehem Steel shot up
overnight. As a result, many theorists followed Taylor's philosophy
when developing their own principles of management.
Scientific management theory analyzes and synthesizes workflow
processes and improving labor productivity. Scientific management is
also called Taylorism, the Taylor system, or the Classical Perspective.
The core ideas of the theory were developed by Frederick Winslow
Taylor in the 1880s and 1890s, and were first published in his
monographs, Shop Management (1905) and The Principles of
Scientific Management (1911). Taylor believed that decisions based
upon tradition and rules of thumb should be replaced by precise
procedures developed after careful study of an individual at work.
Taylor's experiments included determining the best way of performing
each work operation, the time it required, materials needed and the
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work sequence. He wanted to establish a clear division of labor
between management and employees.
Henry Gantt, an associate of Taylor's, developed the Gantt chart, a
bar graph that measures planned and completed work along each
stage of production. Based on time instead of quantity, volume, or
weight, this visual display chart has been a widely used planning and
control tool since its development in 1910.
Frank and Lillian Gilbreth, a husband-and-wife team, studied job
motions. In Frank's early career as an apprentice bricklayer, he was
interested in standardization and method study. He watched
bricklayers and saw that some workers were slow and inefficient, while
others were very productive. He discovered that each bricklayer used a
different set of motions to lay bricks. From his observations, Frank
isolated the basic movements necessary to do the job and eliminated
unnecessary motions. Workers using these movements raised their
output from 1,000 to 2,700 bricks per day. This was the first motion
study designed to isolate the best possible method of performing a
given job. Later, Frank and his wife Lillian studied job motions using a
motion-picture camera and a split-second clock. When her husband
died at the age of 56, Lillian continued their work.
Thanks to these contributors and others, the basic ideas regarding
scientific management developed. They include the following:
Developing new standard methods for doing each job
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Selecting, training, and developing workers instead of allowing
them to choose their own tasks and train themselves
Developing a spirit of cooperation between workers and
management to ensure that work is carried out in accordance
with devised procedures
Dividing work between workers and management in almost
equal shares, with each group taking over the work for which it
is best fitted
Three Assumptions Underlying the General Principles of
Scientific Management
1) Employers and employees have a shared goal in economic gain.
2) Man is rational and economically motivated
3) For every person, there is a job for which he is ideally suited.
The scientific management is a 'manager centric' approach. The most
fundamental aspect of scientific management is that the manager is
primarily responsible for increasing an organization's productivity.
Scientific management principles are to be applied by managers in a
very specific fashion.
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The shortcomings of the Scientific Theory had triggered the quest for
more workable solutions and resulted in the formulation of bureaucratic
management and administrative management theories. The scientific
method was also got refined further during the course of time.
BUREAUCRATIC MANAGEMENT
Bureaucratic management focuses on the ideal form of organization.
Max Weber was the major contributor to bureaucratic management.
Based on observation, Weber concluded that many early organizations
were inefficiently managed, with decisions based on personal
relationships and loyalty. He proposed that a form of organization,
called a bureaucracy, characterized by division of labor, hierarchy,
formalized rules, impersonality, and the selection and promotion of
employees based on ability, would lead to more efficient management.
Weber also contended that managers' authority in an organization
should be based not on tradition or charisma but on the position held
by managers in the organizational hierarchy.
Bureaucracy has come to stand for inflexibility and waste, but Weber
did not advocate or favor the excesses found in many bureaucratic
organizations today. Weber's ideas formed the basis for modern
organization theory and are still descriptive of some organizations.
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Max Weber (1864-1920) a German
sociologist, was a teacher at Berlin
University. He was a chief exponent of a
bureaucratic model. Bureaucratic
organization, in Weber’s views, is the
most efficient form of organization.
In the late 1800s, he disliked that many
European organizations were managed on a “personal” family-like
basis and that employees were loyal to individual supervisors rather
than to the organization. He believed that organizations should be
managed impersonally and that a formal organizational structure,
where specific rules were followed, was important. In other words, he
didn't think that authority should be based on a person's personality.
He thought authority should be something that was part of a person's
job and passed from individual to individual as one person left and
another took over. This non personal, objective form of organization
was called a bureaucracy.
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According to Weber the major characteristics of bureaucracy are:
A well defined hierarchy
All positions within a bureaucracy are structured in a way permitting the
higher positions to supervise and control the lower positions. This
provides a clear chain of command facilitating control and order
throughout the organization.
Division of labor and specialization
All responsibilities in an organization are streamlined in a way that
each employee will have the necessary expertise to master a particular
task. This necessitates granting each employee the requisite authority
to complete all such tasks.
Rules and regulations
All organizational activities are streamlined in a way that standard
operating procedures are developed to provide certainty and facilitate
coordination.
Impersonal relationships between managers and employees
Weber believed that managers should maintain an impersonal
relationship with the employees so that the managers will be free to
take rational decisions rather than one influenced by favoritism and
personal prejudice. This organizational atmosphere would also
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facilitate rational evaluation of employee outcomes where personal
prejudices shall not interfere.
Competence
Competence should be the basis for all decisions made in hiring, job
assignments, and promotions. This would encourage ability and merit
as the most important characteristics of a bureaucratic organization.
Records
Weber felt it is absolutely essential for a bureaucracy to maintain
complete files regarding all its activities. This necessitates an accurate
organizational "memory" where accurate and complete documents will
be available concerning all bureaucratic actions and decisions.
ADMINISTRATIVE MANAGEMENT
Administrative management focuses on the management process and
principles of management. In contrast to scientific management, which
deals largely with jobs and work at the individual level of analysis,
administrative management provides a more general theory of
management. Henri Fayol is the major contributor to this school of
management thought.
Fayol was a management practitioner who brought his experience to
bear on the subject of management functions and principles. He
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argued that management was a universal process consisting of
functions, which he termed planning, organizing, commanding,
coordinating, and controlling. Fayol believed that all managers
performed these functions and that the functions distinguished
management as a separate discipline of study apart from accounting,
finance, and production. Fayol also presented fourteen principles of
management, which included maxims related to the division of work,
authority and responsibility, unity of command and direction,
centralization, subordinate initiative, and team spirit.
Although administrative management has been criticized as being rigid
and inflexible and the validity of the functional approach to
management has been questioned, this school of thought still
influences management theory and practice. The functional approach
to management is still the dominant way of organizing management
knowledge, and many of Fayol's principles of management, when
applied with the flexibility that he advocated, are still considered
relevant.
Henri Fayol (1841-1925) a
French mining engineer,
developed 14 principles of
management based on his
management experiences. These
principles provide modern-day
managers with general guidelines
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on how a supervisor should organize her department and manage her
staff. He spent his entire working career with a mining company, where
he rose from an apprentice to General Manager.
1. Division of Work. Division of work, specialization, produces
more and better work with the same effort. It focuses effort while
maximizing employee efforts. It is applicable to all work including
technical applications. There are limitations to specialization
which are determined by its application.
2. Authority and responsibility. Authority is the right to give
orders and the power to exact obedience. Distinction must be
made between a manager's official authority deriving from office
and personal authority created through individual personality,
intelligence and experience. Authority creates responsibility.
3. Discipline. Obedience and respect between a firm and its
employees based on clear and fair agreements is absolutely
essential to the functioning of any organization. Good discipline
requires managers to apply sanctions whenever violations
become apparent.
4. Unity of command. An employee should receive orders from
only one superior. Employees cannot adapt to dual command.
5. Unity of direction. Organizational activities must have one
central authority and one plan of action.
6. Subordination of Individual Interest to General Interest. The
interests of one employee or group of employees are
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subordinate to the interests and goals of the organization and
cannot prevail over it.
7. Remuneration of Personnel. Salaries are the price of services
rendered by employees. It should be fair and provide
satisfaction both to the employee and employer. The rate of
remuneration is dependent on the value of the services
rendered as determined by the employment market.
8. Centralization. The optimum degree of centralization varies
according to the dynamics of each organization. The objective of
centralization is the best utilization of personnel.
9. Scalar chain. A chain of authority exists from the highest
organizational authority to the lowest ranks. While needless
departure from the chain of command should be discouraged,
using the "gang plank" principle of direct communication
between employees can be extremely expeditious and increase
the effectiveness of organizational communication.
10.Order. Organizational order for materials and personnel is
essential. The right materials and the right employees are
necessary for each organizational function and activity.
11.Equity. In organizations equity is a combination of kindliness
and justice. The desire for equity and equality of treatment are
aspirations to be taken into account in dealing with employees.
12.Stability of Tenure of Personnel. In order to attain the
maximum productivity of personnel, it is essential to maintain a
stable work force. Management insecurity produces undesirable
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consequences. Generally the managerial personnel of
prosperous concerns is stable,
that of unsuccessful ones is
unstable.
13. Initiative. Thinking out a plan and
ensuring its success is an
extremely strong motivator. At all
levels of the organizational ladder zeal and energy on t he part
of employees are augmented by initiative.
14.Esprit de Corps. Teamwork is fundamentally important to an
organization. Creating work teams and using extensive face-to-
face verbal communication encourages this.
Whereas scientific management focused on the productivity of
individuals, the classical administrative approach concentrates on the
total organization. The emphasis is on the development of managerial
principles rather than work methods.
Contributors to this school of thought include Max Weber, Mary Parker
Follett, and Chester I. Barnard. These theorists studied the flow of
information within an organization and emphasized the importance of
understanding how an organization operated.
Mary Parker Follett stressed the importance of an organization
establishing common goals for its employees. However, she also
began to think somewhat differently than the other theorists of her day,
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discarding command-style hierarchical organizations where employees
were treated like robots. She began to talk about such things as ethics,
power, and leadership. She encouraged managers to allow employees
to participate in decision making. She stressed the importance of
people rather than techniques — a concept very much before her time.
As a result, she was a pioneer and often not taken seriously by
management scholars of her time. But times change, and innovative
ideas from the past suddenly take on new meanings. Much of what
managers do today is based on the fundamentals that Follett
established more than 80 years ago.
Chester Barnard, who was president of New Jersey Bell Telephone
Company, introduced the idea of the informal organization — cliques
(exclusive groups of people) that naturally form within a company. He
felt that these informal organizations provided necessary and vital
communication functions for the overall organization and that they
could help the organization accomplish its goals.
Barnard felt that it was particularly important for managers to develop a
sense of common purpose where a willingness to cooperate is strongly
encouraged. He is credited with developing the acceptance theory of
management, which emphasizes the willingness of employees to
accept that managers have legitimate authority to act. Barnard felt that
four factors affected the willingness of employees to accept authority:
The employees must understand the communication.
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The employees accept the communication as being consistent
with the organization's purposes.
The employees feel that their actions will be consistent with the
needs and desires of the other employees.
The employees feel that they are mentally and physically able to
carry out the order.
Barnard's sympathy for and understanding of employee needs
positioned him as a bridge to the behavioral school of management,
the next school of thought to emerge.
The classical school (of management) has sought to define the
essence of management in the form of universal fundamental
functions. These, it was hoped, would form the cognitive basis for a set
of relevant skills to be acquired, by all would-be managers through
formal education.
Body of the classical school's management thought was based on the
belief that employees have only economical and physical needs, and
that social needs and need for job-satisfaction either don't exist or are
unimportant. Accordingly, this school advocates high specialization of
labor, centralized decision making, and profit maximization. See also
behavioral school of management, contingency school of management,
quantitative school of management, and systems school of
management.
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Limitations of the Classical School of Management
Classical theories and the principles derived from them continue to be
popular today with some modifications. Many criticisms have been
directed at the classicists.
Reliance on Experience
Many of the writers in the classical school of management developed
their ideas on the basis of their experiences as managers or
consultants with only certain types of organizations. For instance,
Taylor's and Fayol's work came primarily from their experiences with
large manufacturing firms that were experiencing stable environments.
It may be unwise to generalize from those situations to others'
especially to young, high-technology firms of today that are confronted
daily with changes in their competitors' products.
Untested assumptions
Many of the assumptions made by classical writers were based not on
scientific tests but on value judgments that expressed what they
believed to be proper life-styles, moral codes, and attitudes toward
success. For instance, the classical approaches seem to view the life
of a worker as beginning and ending at the plant door. Their basic
assumption is that workers are primarily motivated by money and that
they work only for more money. They also assume that productivity is
the best measure of how well a firm is performing. These assumptions
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fail to recognize that employees may have wants and needs unrelated
to the workplace or may view their jobs only as a necessary evil.
Failure to Consider The Informal Organization
In their stress on formal relationships in the organization, classical
approaches tend to ignore informal relations as characterized by social
interchange among workers, the emergence of group leaders apart
from those specified by the formal organization, and so forth. When
such things are not considered, it is likely that many important factors
affecting satisfaction and performance, such as letting employees
participate in decision making and task planning, will never be explored
or tried.
Unintended Consequences
Classical approaches aim at achieving high productivity, at making
behaviors predictable, and at achieving fairness among workers and
between managers and workers; yet they fail to recognize that several
unintended consequences can occur in practice. For instance, a heavy
emphasis on rules and regulations may cause people to obey rules
blindly without remembering their original intent. Oftentimes, since
rules establish a minimum level of performance expected of
employees, a minimum level is all they achieve. Perhaps much more
could be achieved if the rules were not so explicit.
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Human Machinery
Classical theories leave the impression that the organization is a
machine and that workers are simply parts to be fitted into the machine
to make it run efficiently. Thus, many of the principles are concerned
first with making the organization efficient, with the assumption that
workers will conform to the work setting if the financial incentives are
agreeable.
Static Conditions
Organizations are influenced by external conditions that often fluctuate
over time, yet classical management, theory presents an image of an
organization that is not shaped by external influences. Since many of
these criticisms of the classical school are harsh, several points need
to be made in defense of writers during this period. First, the work force
was not highly educated or trained to perform many of the jobs that
existed at the time. It was not common for workers to think in terms of
what "career" they were going to pursue. Rather, for many, the
opportunity to obtain a secure job and a level of wages to provide for
their families was all they demanded from the work setting. Second,
much of the writing took place when technology was undergoing a
rapid transformation, particularly in the area of manufacturing. Indeed,
for many writers, technology was the driving force behind
organizational and social change. Thus, their focus was on finding
ways to increase efficiency. It was assumed that all humankind could
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do was to adapt to the rapidly changing conditions. Finally, very little
had been done previously in terms of generating a coherent and useful
body of management theory. Many of the classical theorists were
writing from scratch, obliged for the most part to rely on their own
experience and observations. Thus their focus is understandably
narrow.
As we know, F.W.Taylor, Henri Fayol, and Max Weber are outstanding
contributors of Classical School of management thought who made
great contribution and laid a foundation for most management
principles.
THE BEHAVIORAL SCHOOL
The behavioral school or neo-classical of management thought
developed, in part, because of perceived weaknesses in the
assumptions of the classical school. The classical school emphasized
efficiency, process, and principles. Some felt that this emphasis
disregarded important aspects of organizational life, particularly as it
related to human behavior. Thus, the behavioral school focused on
trying to understand the factors that affect human behavior at work.
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HUMAN RELATIONS
According to the human relations school, the manager should possess
skills for diagnosing the causes of human behavior at work,
interpersonal communication, and motivating and leading workers. The
focus became satisfying worker needs. If worker needs were satisfied,
wisdom held, the workers would in turn be more productive. Thus, the
human relations school focuses on issues of communication,
leadership, motivation, and group behavior. The individuals who
contributed to the school are too numerous to mention, but some of the
best-known contributors include Mary Parker Follett, Chester Barnard,
Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The
human relations school of thought still influences management theory
and practice, as contemporary management focuses much attention on
human resource management, organizational behavior, and applied
psychology in the workplace.
ELTON W. MAYO
- organizational scientist who
founded the human relations
movement
- Focused on social factors
influencing the workplace
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- Focused on the way employees were treated by
management and the relationships they formed with one
another
The Hawthorne Experiments began in 1924 and continued through the
early 1930s. A variety of researchers participated in the studies,
including Clair Turner, Fritz J. Roethlisberger, and Elton Mayo, whose
respective books on the studies are perhaps the best known. One of
the major conclusions of the Hawthorne studies was that workers'
attitudes are associated with productivity. Another was that the
workplace is a social system and informal group influence could exert a
powerful effect on individual behavior. A third was that the style of
supervision is an important factor in increasing workers' job
satisfaction. The studies also found that organizations should take
steps to assist employees in adjusting to organizational life by fostering
collaborative systems between labor and management. Such
conclusions sparked increasing interest in the human element at work;
today, the Hawthorne studies are generally credited as the impetus for
the human relations school.
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BEHAVIORAL SCIENCE
Behavioral science and the study of organizational behavior emerged
in the 1950s and 1960s. The behavioral science school was a natural
progression of the human relations movement. It focused on applying
conceptual and analytical tools to the problem of understanding and
predicting behavior in the workplace. However, the study of behavioral
science and organizational behavior was also a result of criticism of the
human relations approach as simplistic and manipulative in its
assumptions about the relationship between worker attitudes and
productivity. The study of behavioral science in business schools was
given increased credence by the 1959 Gordon and Howell report on
higher education, which emphasized the importance to management
practitioners of understanding human behavior.
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The behavioral science school has contributed to the study of
management through its focus on personality, attitudes, values,
motivation, group behavior, leadership,
communication, and conflict, among
other issues. Some of the major
contributors to this school include
Douglas McGregor, Chris Argyris,
Frederick Herzberg, Renais Likert, and
Ralph Stogdill, although there are many
others.
ABRAHAM MASLOW
– Father of Humanistic Psychology
– Theory of Motivation/ Hierarchy of needs: physiological,
safety, social esteem, and self actualization
– Each step of the hierarchy must be satisfied before the
next can be activated, and that once a need was
substantially satisfied, it no longer motivated behavior.
Self actualization, achieving one’s full potential, summit of a human
being’s existence
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DOUGLAS McGREGOR
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THE MODERN MANAGEMENT SCHOOL
Modern management thought has evolved from older theories of
management and years of management experience. Additionally,
supporting and conflicting theories have been offered over the years
leading to more confusion. Thus, from the "Management Theory
Jungle" (Koontz), has emerged the thought of modern management.
DECISION THEORY
The decision theory school of management, led by Simon looks upon
the management processes as a decision making process. In view of
the decision theories, since the performance of various management
functions involved decision making the entire field of management can
be studied from the study of the process of decision making. They have
expanded their area of theory building from the decision making
processes to the study of the decision, the decision maker and the
social and psychological environment of the decision maker. The
decision theory starts with the small areas of decision making and then
looks at the entire field of management through this keyhole.
Decision theory approach
The decision theory school focused on the managerial decision making
which, in its view, is the core management task, pervading all
management functions. Herbert A. Simon, the chief exponent of this
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school, uses managing and decision making as synonymous. Decision
theory approach has the following features.
1. Management is essentially decision making.
2. The members of the organizations are decision makers and
problem solved.
3. Organization can be treated as a combination of various decision
centers. The level and importance of the organizational members are
determined on the basis of importance of decision which they make.
4. Quality of decision affects the organizational effectiveness.
5. All factors affecting the decision making are the subject matter of
the study.
Uses and limitations: the approach contributes a lot of towards the
sharpening of the managerial tools especially for making suitable
decisions in the organization. The school as how the managers can
discharge their functions effectively. But it does not take the total view
of the management. As such, its scope is quite limited considering the
requirements of the management.
MANAGEMENT SCIENCE AND MIS
Management science (also called operations research) uses
mathematical and statistical approaches to solve management
problems. It developed during World War II as strategists tried to apply
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scientific knowledge and methods to the complex problems of war.
Industry began to apply management science after the war. George
Dantzig developed linear programming, an algebraic method to
determine the optimal allocation of scarce resources. Other tools used
in industry include inventory control theory, goal programming, queuing
models, and simulation. The advent of the computer made many
management science tools and concepts more practical for industry.
Increasingly, management science and management information
systems (MIS) are intertwined. MIS focuses on providing needed
information to managers in a useful format and at the proper time.
Decision support systems (DSS) attempt to integrate decision models,
data, and the decision maker into a system that supports better
management decisions.
Management science theory is an approach to management that
focuses on the use of rigorous quantitative techniques to help
managers make maximum use of organizational resources to produce
goods and services. In essence, management science theory is an
extension of scientific management, which, as developed by Taylor,
also took a quantitative approach to measuring the worker-task mix to
raise efficiency. There are many branches of management science,
and once again, IT, which is having a significant impact on all kinds of
management practices, is affecting the tools managers use to make
decisions.
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Each branch of management science deals with a specific set of
concerns:
• Quantitative management utilizes mathematical techniques—such as
linear and nonlinear programming, modeling, simulation, queuing
theory, and chaos theory—to help managers decide, for example, how
much inventory to hold at different times of the year, where to locate a
new factory, and how best to invest an organization’s financial capital.
IT offers managers new and improved ways of handling information so
that they can make more accurate assessments of the situation and
better decisions.
• Operations management provides managers with a set of techniques
that they can use to analyze any aspect of an organization’s production
system to increase efficiency. IT, through the Internet and through
growing B2B networks, is transforming the way managers handle the
acquisition of inputs and the disposal of finished products.
• Total quality management (TQM) focuses on analyzing an
organization’s input, conversion, and output activities to increase
product quality.40 Once again, through sophisticated software
packages and computer-controlled production, IT is changing the way
managers and employees think about the work process and ways of
improving it.
Total quality management (TQM) is a philosophy or approach to
management that focuses on managing the entire organization to
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deliver quality goods and services to customers. This approach to
management was implemented in Japan after World War II and was a
major factor in their economic renaissance. TQM has at least four
major elements. Employee involvement is essential in preventing
quality problems before they occur. A customer focus means that the
organization must attempt to determine customer needs and wants and
deliver products and services that address them.
Benchmarking means that the organization is always seeking out other
organizations that perform a function or process more effectively and
using them as a standard, or benchmark, to judge their own
performance. The organization will also attempt to adapt or improve the
processes used by other companies. Finally, a philosophy of
continuous improvement means that the organization is committed to
incremental changes and improvements over time in all areas of the
organization. TQM has been implemented by many companies
worldwide and appears to have fostered performance improvements in
many organizations. Perhaps the best-known proponent of this school
of management was W. Edwards Deming.
• Management information systems (MISs) help managers design
systems that provide information about events occurring inside the
organization as well as in its external environment—information that is
vital for effective decision making. Once again, IT gives managers
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access to more and better information and allows more managers at all
levels to participate in the decisionmaking process.
All these subfields of management science, enhanced by sophisticated
IT, provide tools and techniques that managers can use to help
improve the quality of their decision making and increase efficiency and
effectiveness.
PRODUCTION AND OPERATIONS MANAGEMENT
This school focuses on the operation and control of the production
process that transforms resources into finished goods and services. It
has its roots in scientific management but became an identifiable area
of management study after World War II. It uses many of the tools of
management science.
Operations management emphasizes productivity and quality of both
manufacturing and service organizations. W. Edwards Deming exerted
a tremendous influence in shaping modern ideas about improving
productivity and quality. Major areas of study within operations
management include capacity planning, facilities location, facilities
layout, materials requirement planning, scheduling, purchasing and
inventory control, quality control, computer integrated manufacturing,
just-in-time inventory systems, and flexible manufacturing systems.
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SYSTEMS SCHOOL
The systems approach to management is more a perspective for
viewing problems than a school of management thought.
Ludwig von Bertalanffy is recognized as the founder of general
system theory. The system approach is based on the concept that an
organization is a system. A system is defined as a number of
interdependent parts functioning as a whole for some purpose. Here
there are five components: inputs, a transformation process, outputs,
feedback, and the environment.
The systems approach is very important in general management
analysis. Four especially ideas that have had substantial impact on
management thinking are the concepts of open versus closed systems,
subsystems, subsystems and interdependencies, synergy and entropy.
Open versus closed systems. According to Ludwig von Bertlanffy,
there are two basic types of systems: closed systems and open
systems. Closed system are not influenced by and do not interact with
their environments. Open systems interact with
their environment. All organizations are open
systems, although the degree of interaction
may vary.
Entropy. Entropy is a universal property of
systems and refers to their tendency to run down and die. A primary
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objective of management, form systems perspective, is to avoid
entropy.
Synergy. Synergy means that the whole is greater the sum of its parts.
Synergy is an important concept for managers in that it reinforces the
need to work together in a cooperative fashion.
Subsystems. A subsystem is a system within a system. From another
perspective, subsystems are parts of a system that depend on one
another.
The concept “wholeness” is very important in general system analysis.
L. Thomas Hopkins suggested the following six guidelines regarding
system “wholeness” that should be remembered during systems
analysis:
The whole should be the main focus of analysis, with the parts
receiving secondary attention. Integration is the key variable in
wholeness analysis.
Possible modifications in each part should be weighted in relation to
possible effects on every other part. Each part has some role to
perform so that the whole can accomplish its purpose. The nature of
the parts and its function is determined by its position in the whole. All
analysis starts with the existence of the whole. Systems theory offers
the manager a useful perspective. For example, the management
system is based upon general system theory.
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Based on the concept that an organization is a system.
To management is more a perspective for viewing problems
than a school of management thought.
Views organization as a system composed of interconnected-
and thus mutually dependent-sub-systems.
Sub-systems can have their own sub-sub-systems.
A system can be perceived as composed of some components,
functions and processes (Albrecht, 1983)
Three (3) Basic Elements of Systems Approach (Bakke, 1953)
Components (5 basic, interdependent parts)
1. the individual
2. the formal and informal organization
3. patterns of behavior emerging from role demands of the
organization,
4. role comprehension of the individual
5. the physical environment in which individuals works.
Linking processes:
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1. Communication: means for eliciting action, exerting
control and effecting coordination to link decision centers in the
system in a composite
2. Balance: the equilibrium between different parts of the
system so that they keep a harmoniously structured relationship with
one another.
3. Decision analysis: considered to be a linking process
Goals of Organization:
1. Growth: expansion or development
2. Stability: solidity or strength
3. Interaction: implies how best the members can interact
with one another to their mutual advantage.
Characteristics of Systems
Systems have structure, defined by components/elements and
their composition;
Systems have behavior, which involves inputs, processing and
outputs of material, energy, information, or data;
Systems have interconnectivity: the various parts of a system
have functional as well as structural relationships to each other.
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Systems may have some functions or groups of functions
or
The Systematic School of Management Thought
views organizations as made up of 'input-process-
output' building blocks
embraces techniques that integrate both scientific
management and
sociological/psychological techniques. ('Human
nature' must be included.)
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•
•
The systems school focuses on understanding the organization as an
open system that transforms inputs into outputs. This school is based
on the work of a biologist, Ludwig von Bertalanffy, who believed that a
general systems model could be used to unite science. Early
contributors to this school included Kenneth Boulding, Richard
Johnson, Fremont Kast, and James Rosenzweig.
Kenneth Boulding
- He was cofounder of General Systems Theory and founder
of numerous ongoing intellectual projects in economics and
social science.
The systems school began to have a strong impact on management
thought in the 1960s as a way of thinking about managing techniques
that would allow managers to relate different specialties and parts of
the company to one another, as well as to external environmental
factors. The systems school
focuses on the organization as
a whole, its interaction with the
environment, and its need to
achieve equilibrium. General
systems theory received a
great deal of attention in the
1960s, but its influence on management thought has diminished
42
somewhat. It has been criticized as too abstract and too complex.
However, many of the ideas inherent in the systems school formed the
basis for the contingency school of management.
CONTINGENCY SCHOOL
The contingency school focuses on applying management principles
and processes as dictated by the unique characteristics of each
situation. It emphasizes that there is no one best way to manage and
that it depends on various situational factors, such as the external
environment, technology, organizational characteristics, characteristics
of the manager, and characteristics of the subordinates. Contingency
theorists often implicitly or explicitly criticize the classical school for its
emphasis on the universality of management principles; however, most
classical writers recognized the need to consider aspects of the
situation when applying management principles.
Suggests that different environments require different
organizational relationships for optimum effectiveness, taking
consideration various social, legal, political, technical and
economic factors. ( Hellriegel and Slocum, 1973)
The contingency school originated in the 1960s. It has been applied
primarily to management issues such as organizational design, job
43
design, motivation, and leadership style. For example, optimal
organizational structure has been theorized to depend upon
organizational size, technology, and environmental uncertainty; optimal
leadership style, meanwhile, has been theorized to depend upon a
variety of factors, including task structure, position power,
characteristics of the work group, characteristics of individual
subordinates, quality requirements, and problem structure, to name a
few. A few of the major contributors to this school of management
thought include Joan Woodward, Paul Lawrence, Jay Lorsch, and Fred
Fiedler, among many others.
Four important ideas of Contingency Theory
• There is no universal or one best way to manage.
• The design of an organization and its subsystems must 'fit' with
the environment.
• Effective organizations not only have a proper 'fit' with the
environment but also between its subsystems
• The needs of an organization are better satisfied when it is
properly designed and the management style is appropriate both
to the tasks undertaken and the nature of the work group.
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the development of contingency theory in the 1960s by Tom Burns
and G. M. Stalker in Britain and Paul Lawrence and Jay Lorsch in the
United States.
Tom Burns
Through their analysis they co-related the structure of an organization
to the surrounding environmental conditions. In the Fifties of the last
century Burns and Stalker (both from UK) analysed the environments
and structures of several British and Scottish firms. In their pioneering
work "Management of innovation" (1968)
The crucial message of contingency theory is that
there is no one best way to organize: The
organizational structures and the control systems
that managers choose depend on—are contingent
on—characteristics of the external environment in which the
organization operates. According to contingency theory, the
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characteristics of the environment affect an organization’s ability to
obtain resources; and to maximize the likelihood of gaining access to
resources, managers must allow an organization’s departments to
organize and control their activities in ways most likely to allow them to
obtain resources, given the constraints of the particular environment
they face. In other words, how managers design the organizational
hierarchy, choose a control system, and lead and motivate their
employees is contingent on the characteristics of the organizational
environment (see Figure 2.5). An important characteristic of the
external environment that affects an organization’s ability to obtain
resources is the degree to which the environment is changing.
Changes in the organizational environment include changes in
technology, which can lead to the creation of new products (such as
compact discs) and result in the obsolescence of existing products
(eight-track tapes); the entry of new competitors (such as foreign
organizations that compete for available resources); and unstable
economic conditions. In general, the more quickly the organizational
environment is changing, the greater are the problems associated with
gaining access to resources and the greater is managers’ need to find
ways to coordinate the activities of people in different departments to
respond to the environment quickly and effectively.
The contingency school of management can be summarized as an “it
all depends” approach. The appropriate management actions and
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approaches depend on the situation. Managers with a contingency
view use a flexible approach, draw on a variety of theories and
experiences, and evaluate many options as they solve problems.
Contingency management recognizes that there is no one best way to
manage. In the contingency perspective, managers are faced with the
task of determining which managerial approach is likely to be most
effective in a given situation. For example, the approach used to
manage a group of teenagers working in a fast-food restaurant would
be very different from the approach used to manage a medical
research team trying to find a cure for a disease.
Contingency thinking avoids the classical “one best way” arguments
and recognizes the need to understand situational differences and
respond appropriately to them. It does not apply certain management
principles to any situation. Contingency theory is a recognition of the
extreme importance of individual manager performance in any given
situation. The contingency approach is highly dependent on the
experience and judgment of the manager in a given organizational
environment.
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