Summary CH 2

Chapter 2

Management Yesterday and Today

What does history tell us about management?

 Organised endeavours have existed for thousand of years

o 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:
o 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
o 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:
o 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)

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Summary CH 2
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
o 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
o 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:
o 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)
o Max Weber
 Studied organisational activity
 Developed a theory of authority structures

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Summary CH 2
 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
o 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
o In budgeting, scheduling and quality control
o 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

o 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

o 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
o 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
o 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
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Summary CH 2
 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

o 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
o No longer constrained by national borders
o Working with people from different cultures
o 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
o 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
o 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
o = a workforce that is more heterogeneous in terms of age, gender, race, ethnicity, age
and other characteristics that reflect differences
o Brings a broad range of view-points and problem-solving skills
o Ageing population
 Entrepreneurship
o = 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