Strategic Management

Chapter 2

Management Yesterday and Today

What does history tell us about management?

 Organised endeavours have existed for thousand of years

○ E.g. the pyramids and the arsenal of Venice (warships
on the canal, filled at with various things at various
stops along the canals)
 Two important historical events:
○ Adam Smith’s Wealth of Nations published
 Outlines the economic advantages of the division
of labour
 The division of labour or job specialisation = the
breakdown of jobs into narrow and repetitive tasks
 Increased productivity by increasing individual
workers skill and dexterity
 Save time lost in changing tasks
○ The Industrial Revolution = the advent of machine
power, mass production and transport efficiency
 18th century Great Britain
 Change from the manufacturing of goods in
homes to in factories
 The need for formal management theory was
established

The 6 Main Approaches to Management

1. Scientific Management
2. General Administrative Theory
3. Quantitative Approach
4. Organisational Behaviour
5. Systems Approach
6. Contingency Approach

What is scientific management?

  Scientific Management = the use of scientific method to define
the ‘one best way’ for a job to be done
 Important contributors:
○ Frederick W. Taylor:
 Clear guidelines for improving production
efficiency
 Four principles of management
1. Develop a science for each element of an
individual’s work, which will replace the old
rule-of –thumb method
2. Scientifically select, then train, teach and
develop the worker (previously, workers
chose their own work and trained
themselves as best they could)
3. Heartily cooperate with the workers so as
to ensure that all work is done in
accordance with the principles of the
science that has been developed.
4. Divide work and responsibility almost
equally between management and workers.
Management takes over all the work for
which it is better fitted that the workers
are. (Previously, almost all the work and the
greater part of the responsibility were
thrown on the workers)
 Pig-iron experiment
 Put the right person on the right job
 With the correct tools and equipment
 Had the worker follow his instructions exactly
 Motivated the worker with economic incentive
○ Frank and Lilian Gilbreth
 Used motion pictures to study ways eliminate
wasteful hand and body movement
 Invented microchronometer – recorded a workers
motions and the amount of time spent doing each
motion
 Therbligs = a classification system for labelling 17
basic hand motions
 Still used today to improve efficiency
○ To hire best qualified workers and design incentive
schemes based on output

What is general administrative theory?

 General Administrative Theory = Writers who developed more

general theories of what managers do and what constituted
good management practice
 Focuses more on the whole organisation
  Important contributors:
○ Henri Fayol
 Directed attention at the activities of all the
managers
 Argued that management was an activity common
to al human endeavours in business, government
and home
 14 principles of management
• Principles of management = the
fundamental rules of management that
could be taught in schools and applied in all
organisational situations
1. Division of work (specialisation)
2. Authority
3. Discipline (employees obey and respect)
4. Unity of command (orders from one
superior)
5. Unity of direction
6. Subordination of individual interests to the
general interest
7. Remuneration (workers paid fairly)
8. Centralisation (degree to which employees
involved in decision making)
9. Scalar chain (chain of authority from top to
bottom)
10.Order
11.Equity
12.Stability of tenure of personnel (provide
replacement personnel when necessary)
13.Initiative
14.Esprit de corps (promoting team spirirt and
building harmony)
○ Max Weber
 Studied organisational activity
 Developed a theory of authority structures
 The ideal structure = bureaucracy
• = a form of organisation characterised by
division of labour, a clearly defined
hierarchy, detailed rules and regulations,
and interpersonal relationships
 Model structure for today’s organisations
 Still used today as part of many current management
concepts
○ Weber not as relevant in today’s society as it makes it
difficult to adapt to the dynamic environment

What is the quantitative approach to management?

  Using quantitative techniques to improve decision making:
also known as operations research and management science
 Developed after the war as many military techniques to
resolve problems were applied to business
 Involves application of statistics, optimisation models,
information models and computer simulations
 Still used today, especially in planning and control
○ In budgeting, scheduling and quality control
○ Not as much influence as organisational behaviour

What is the organisational behavioural approach to

management?

 Organisational behaviour (OB) is the study of people at work

○ Early advocates (Owen, Munsterberg, Follett and
Barnard)
 Believe that people are the most important aspect
of the organisation and should be managed
accordingly
 Employee selection procedures, employee
motivation programs, employee work teams and
organisation-external environment management
techniques

○ Hawthorne Studies
 The most important contribution
 Started as a scientific management experiment
and went through several phases, including
illumination phase and group studies
 Stimulated an interest in human behaviour in
organisations
○ Although not based on any real research, the human
relations movement has some definite influence on
management theory and practice.
 Commitment to making management practices
more humane – more satisfied employees perform
better
 Maslow (hierarchy of needs) and McGregor (theory
X and theory Y)
 Behavioural science theories
• Psychologists and sociologists who relied on
scientific method for the study of
organisational behaviour
○ Behavioural approach has largely shaped how today’s
organisations are managed
What is the systems approach?

 Systems = a set of interrelated and interdependent parts

arranged in a manner that produces a unified whole
 Closed systems = systems that are not influenced by and do
not interact with their environment
 Open systems = systems that dynamically interact with their
environment
 Organisations are made up of ‘interdependent factors,
including individuals, groups, attitudes, motives, formal
structure, interactions, goals, status and authority’
 These interdependent factors must work together in an
organisation
 Organisations are not self-contained and rely on environment
for essential inputs and as sources to absorb their outputs

What is the contingency approach?

 No universally applicable management rules that would work

in all situations
○ It all depends: ‘if, then’
 Different and changing situations require managers to use
different approaches and techniques
 Four contingency variables
1. Organisational size
2. Routineness of task technology
3. Environmental Uncertainty
4. Individual Differences (differ in terms of desire for
growth, autonomy, tolerance for ambiguity,
expectations)

What are the current trends and issues impacting

today’s managers?

 Globalisation
○ No longer constrained by national borders
○ Working with people from different cultures
○ Coping with anti-capitalist backlash – economic values
aren’t universally transferable and must be modified to
reflect the values of the different countries in which the
company operates
○ Movement of jobs to countries with low-cost labour – not
just factory and call-centre workers, also includes well-
educated individuals capable of working in an
information-based economy’
 Ethics
○ Process for addressing ethical dilemmas
  What is the ethical dilemma?
 Who are the affected stakeholders?
 What personal, organisational and external factors
are important to my decision?
 What are possible alternatives?
 Make a decision and act on it.
 Workforce diversity
○ = a workforce that is more heterogeneous in terms of
age, gender, race, ethnicity, age and other
characteristics that reflect differences
○ Brings a broad range of view-points and problem-solving
skills
○ Ageing population
 Entrepreneurship
○ = the process whereby an individual or a group od
indiiduals uses organised efforts and means to pursue
an opportunity to create value and grow by fulfilling
wants and needsthrough innovation and uniqueness, no
matter what resources are currently controlled.
 E-business (enhanced, enabled, total)
○ = a comprehensive term describing the wat an
organisation does its work by using electronic (internet)
linkages with its key constituencies in order to achieve
its goals efficiently and effectively
○ E-commerce = any form of business exchange or
transaction in which the parties interact electronically
○ Intranet = an internal organisational communication
system that sues internet technology and is accessible
only by organisational employees
 Knowledge management
○ Learning organisations = organisations that have
developed the capacity to learn, adapt and change
continuously
 Learning organisations
 Quality management
 Management sustainability