Chapter 2

Development of Management Thought

Introduction

According to one school of thought, history has no relevance to the problems faced by managers today.
Some are also of the opinion that management theory is too abstract to be of any practical use.
However, both theory and history are indispensable tools for managing contemporary organizations.

Like most modern disciplines, contemporary management thought has its foundations in the history of
management and the many significant contributions of theorists and practitioners. A theory is a
conceptual framework of organizing knowledge that provides a blueprint for various courses of action.
Hence, an awareness and understanding of important historical developments and theories propounded
by early thinkers is important for today’s managers.

In this chapter, we first discusses at the early approaches to management. We then focuses on four well
established schools of management thought (i) the classical approach (ii) the behavioural approach (iii)
the qualitative approach and (iv) the modern approaches of management. Finally, some emerging
approaches in management thought are discussed.

The Industrial Revolution, which began in Europe in the mid-1970s, was the starting point for the
development of management concepts and theories. The rapid growth in the number of factories during
this period and the need to coordinate the efforts of large number of people in the production process
necessitated the development of management theories and principles. Many theorists and practitioners
in the mid and late 1800s (pre-classical period) contributed valuable ideas that laid the foundations for
subsequent broader inquires into the nature of management. Five principle contributors can be
identified in this early period of development of management thought: Robert Owen, Charles Babbage,
Andre Ure, Charles Dupin, and Henry Robinson Towne.

Management Approaches

Major Classification of Management Approaches Major Contributors

Classical Approach Scientific management Frederic W. Taylor, Frank and Lilian
Gilberth and Henry Gantt
Bureaucratic Management Max Weber
Administrative Management Henry Fayol
Behavioural Approach Group Influencer Mary Parker Follet
Hawthorne Studies Elton Mayo
Maslow’s Needs Theory Abraham Maslow
Theory X and Theory Y Douglas McGregor
Model I versus Model II values Chris Argyris
Quantitative Approach Management Science
Operations Management
Management Information System
Modern Approaches They Systems Theory
 Contingency Theory
Emerging Approaches Theory Z and Quality William Ouchi
Management

Pre-classical Contributors to Management Thought

Name Period Contribution

Robert Owen 1771-1858 Proposed legislative reforms to improve working conditions of
labour
Charles Babbage 1792-1871 Advocated the concept of ‘division of labour’; devised a profit-
sharing plan which lead to the modern-day Scanlon Plan
Adrew Ure 1778-1857 Advocated the study of management
Charles Dupin 1784-1873
Henry R. Towne 1844-1924 Emphasized the need to consider management as a spate field of
study and the importance of business skills for running a business.

Brief Overview of Classical Theories

Approach Rationale Focus

Scientific Management
Administrative Principles
Bureaucratic organization
One best way to do each job
One best way to put an
organization together
Rational and interpersonal
organizational arrangements
Job level
Organizational level
Organizational level

Scientific Management

Scientific management became increasingly popular in the early 1900s. In the early 19th century,
scientific management was defined as “that kind of management which conducts a business or affairs by
standards established, by facts or truths gained through systematic observation, experiment, or
reasoning.”

Frederick Winslow Taylor

Frederic Winslow Taylor took up Henry Towne’s challenge to develop principles of scientific
management. Taylor, considered “father of scientific management”, wrote ‘The Principles of Scientifc
Management’ in 1911. An engineer and inventor, Taylor first began to experiment with new managerial
concepts in 1978 while employed at the Midvale Steel Co. at Midvale, his rise from labourer to chief
engineer within 6 years gave him the opportunity to tackle a grave issue faced by the organization-the
soldiering problem. ‘Soldiering refers to the practice of employees deliberately working at a pace slower
than their capabilities. According to Taylor, workers indulge in soldiering for three main reasons namely
 1. Workers feared that if they increased their productivity, other workers would lose their jobs
2. Faulty wage systems employed by the organization encouraged them to work at a slow pace
3. Outdated methods of working handed down from generation to generation led to a great deal
of wasted efforts.

Taylor felt that soldiering problem could be eliminated by developing a science of management.

In essence, scientific management as advocated by Taylor emphasizes on

(1) Need for developing a scientific way of performing each job

(2) Training and preparing workers to perform that particular job
(3) Establishing harmonious relations between management and workers so that the job is
performed in the desired way.

Management/Contribution of Taylor Scientific Management

Following five points are major outcome of Scientific Management

1. Time and Motion Study

2. Differential Payment
3. Drastic Reorganization of Supervision
4. Scientific Recruitment and Training
5. Intimate Friendly Cooperation between Management and Workers

Time and Motion Study

Taylor tried to determine the best way to perform each and every job. To do so, he introduced a method
called ‘time-and-motion’ study. In a ‘time-and-motion’ study, jobs are broken down into various small
tasks or motions and unnecessary motions are removed to find out the best way of doing a job. Then
each part of the job is studied to find out the expected amount of goods that can be produced each day.
The objective of a time –and –motion analysis is to ascertain a simpler, easier and better way of
performing a work or job.

 Employees used to hold back production to its one-third level because they feared that their
employers would cut their piece rate as soon as there was a rise in production
 Each motion of a job was to be times with the help of a stop watch and shorter and fewer
motions were to be developed.
 This replaced the old rule-of-thumb-knowledge of the workman

Differential Payment
Taylor felt that the wage system was one of the major reasons for soldiering. To resolve this problem,
he advocated the use of a piece-rate incentive system. The aim of this system was to reward the worker
who produced the maximum output. Under this system, a worker who met the established standards of
performance would earn the basic wage rate set by management. If the worker’s output exceeded the
set target, his wages would increase proportionately. The piece-rate system, according to Taylor, would
motivate workers to produce more and thus help the organization perform better.
  Incentive was linked with production
 A worker received low piece rate it he produced the standard number of pieces and high rate if
he surpassed the standard.
 Taylor thought that the attraction of high piece rate would motivate workers to increase
production

Drastic Reorganization of Supervision

Taylor introduced concept of ‘Functional Foremanship’
 The foreman simply told the worker what jobs to perform
 Taylor suggested that the work should be planned by a foreman and not by the worker.
 There should be as many foremen as there are special functions involved in doing a job and each
of these foremen should give orders to the workers on his specialty.

Scientific Recruitment & Training

Management should develop and train every worker to bring out his best faculties and to enable
him to a higher, more interesting and more profitable class of work than he has done in the past.

Friendly Cooperation between the Management & Workers

 Rather than quarrel over whatever profits there were, they should try to increase production.
 Management and labour had a common interested in increasing productivity.

Contributions of Scientific Management

 Tools and physical movements involved in a task can be made more efficient and rational
 Without ability and training a person cannot be expected to do his job properly
 Encouraged managers to seek that “One best way” of doing a job
 Rational approach
Limitations of Scientific Approach
 No man is entirely an “economic man”
 Taylor’s time and motion study is not accepted as entirely scientific. There is no such thing as
“one best way” so far as the component motions are concerned, because no two individuals can
be expected to work in the same way at the same rhythm, with the same attention and the
same learning speed.

Administrative Management- Henri Fayol’s 14 Principles of Management

1. Division of Work
2. Authority and Responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of Individual Interest to General Interest
7. Remuneration
8. Centralization
9. Scalar chain
10. Order
11. Equity
12. Stability of Tenure of Personnel
13. Initiative
 14. Esprit de Corps

Division of Work
 Division of work in management process produces more and better work
 E.g. Division of work based on technical or managerial specialization.

Authority & Responsibility

 Authority
o Right to give orders and power to extract obedience
 Responsibility
o When a manager exercises authority, he should be held responsible for getting the
work done in desired manner

Discipline
 Obedience to authority
 Adherence to rules
 Respect for superiors
 Dedication to job

Unity of Command
 Each employee should receive orders or instructions from one superior only

Unity of Direction
 Subordination of Individual Interest to General Interest

Remuneration
 The remuneration paid to the personnel of the firm should be fair. It should be based on general
business conditions, cost of living, productivity of the concerned employees and the capacity of
the firm to pay.

Centralzation
 If subordinates are given more role and importance in the management and organization of the
firm, it is decentralization. The management must decide the degree of centralization or
decentralization of authority on the basis of the nature of the circumstances, size of the
undertaking, the types of activities and the nature of organizational structure.

Scalar Chain
 Scalar chain means the hierarchy of authority from the highest executive to the lowest one for
the purpose of communication. It states superior-subordinate relationship and the authority of
superiors in relation to subordinates at various levels. As per the principle, the order or
communications should pass through the proper channels of authority along the scalar chain.
But in case there is a need for swift action, the proper channels of authority must be short-
circuited by making direct contact –also known as gang plank with the concerned authority.

Order
  This refers to both material and social order in organizations. Material order indicates that
everything is kept in the right place to facilitate the smooth coordination of work activities.
Similarly, social order implies that the right person is placed in the right job by proper selection
procedure.

Stability of Tenure of Personnel

 A high labour turnover should be prevented and managers should motivate their employees to
do a better job.

Initiative
 Employees should be encouraged to give suggestions and develop new and better work
practices.

Espirit de corps
 This means ‘a sense of union’. Management must inculcate a team spirit in its employees.

Criticism of Ideas of Fayol

 It leads to formation of small work groups
 It does not provide employee opportunity to use all skills
 Increase in overhead cost because of specialization
 Contradiction: Principle of unity of command and the principle of specialization or division of
labour
 No empirical evidences
 Mechanical organizational structure
 These principles are based on the assumption that organizations are closed systems.

Bureaucracy (Max Webber)

Bureaucratic management, one of the schools of classical management, emphasizes the need for
organizations to function on a rational basis. Weber (1864-1920), a contemporary of Fayol, was one of
the major contributors to this school of thought. He observed that nepotism ( hiring of relatives
regardless of their competence) was prevalent in most organizations. Weber felt that nepotism was
grossly unjust and hindered the progress of individuals. He therefore, identified the characteristics of an
ideal bureaucracy to show how large organizations should be run. The term ‘bureaucracy’- derived from
the German buro-meaning office referred to organizations that operated on rational basis. According to
Weber, “ a bureaucracy is a highly structured, formalized, and impersonal organization.” In other words,
it is a formal organization structure with a set of rules and regulations.

Characteristics of Bureaucratic Administration

 There is insistence on following standard rules
 There is a systematic division of work
 Principle of hierarchy is followed
 It is necessary for the individual to have knowledge of and Training in the Application of Rules
 Administrative acts, Decisions and rules are recorded in writing
 There is rational personnel administration
Contributions and Limitations of Bureaucracy
 Contributions
o Logical extension of management
o Concept has enabled most modern large scale organizations
 Limitations
o Over conformity to rules
o Buck-passing
o Categorization of queries
o Displacement of goals
o No real right of appeal
o Neglect of informal groups
o Rigid structure
o Inability to satisfy the needs of mature individuals

The term ‘bureaucracy’ is sometimes used to denote red tapism and too many rules. However, the
bureaucratic characteristics of organizations outlined by Weber have certain advantages. They help
remove ambiguities and inefficiencies that characterize many organizations. In addition, they undermine
the culture of patronage that he saw in many organizations.

Neo-classical Approaches
 These approaches are called neo-classical because they do not reject the classical concepts but
only try to refine and improve them.
o Illumination Experiments
o Relay Assembly Test Room
o Interviewing Programme
o Bank Writing Test Room

Contributions of the Human Relations Movement

 The business organization is also a social system

 There is no correlation between improved working conditions and high production
 A worker’s production norm is set and enforced by his group
 A worker does not work for money only
 Employee centered leadership is more effective
 The informal group and not the individual is the dominant unit of analysis in organization.
 The business organization is also a social system
 There is no correlation between improved working conditions and high production
 A worker’s production norm is set and enforced by his group
 A worker does not work for money only
 Employee centered leadership is more effective
 The informal group and not the individual is the dominant unit of analysis in organization.

Limitations
  Focus on human aspects and ignores other variables
 Over simplification of organization as a big family
 Over-emphasizes symbolic rewards and underplay the role of material rewards
 Unrealistic picture about informal groups
 Production oriented and not employee-oriented
 Leisurely process of decision making
 Unrealistic demand on the superior
 Wrong assumption that satisfied employees are more productive workers.

Behavioral Approach
 The behavioral approach recognizes the practical and situational constraints on human
rationality for making optimal decisions.
 Encourages the process of self-direction and control instead of imposed control.
 Consider organization as groups of individuals with certain goals
 Organizational change and conflict is realistic

Quantitative Approach
 Also called as management science approach
 To provide quantitative tools and techniques for objectively rational decisions.

Systems Approach
 A system is a set of interdependent parts
 Central to the systems approach is the concept of “holism”
 A system can be either open or closed
 Every system has a boundary

Contingency Approach
 Attempts to integrate the various schools of management thought
 Results differ because situations differ