Chapter

Two
The Evolution
of
Managemen
t
Theory

Nov
2011
 • Management is as old as
human civilization
• Egyptians, Babylonians,
Greeks, Hebrews, Chinese,
Romanians… practiced
management
• Churches and Military contributed
to the development of
management
• Early contributors: Robert
Owen, Charles Babbage,…
• But as a theory, it is the result
Nov of 20th century.
2011
• Modern management
began in the late 19th
century.
– Organizations were seeking
ways to better satisfy customer
needs.
– Machinery was changing the
way goods were produced.
– Managers had to increase the
efficiency of the worker-task
Nov
mix.
2011
 Job
• Adamspecialization
Smith, 18th century
economist, found firms
manufactured pins in two ways:
– Craft -- each worker did all steps.
– Factory -- each worker specialized in one
step.
• Smith found that the factory
method had much higher
productivity.
– Each worker became very skilled at
one, specific task.
• Breaking down the total job allowed
for the division of labor.
Nov .
2011
Evolution of Management
Theory
Modern Management Theories

Neo-classical Management Theories

Classical Management Theories

Nov
2011
 Classical Management
Theories
• People are economically rational
• In 20th c, the concern in management
was how to increase productivity and
efficiency of workers
• Two perspectives : Improving the
productivity of the work force (scientific
management) and managing the entire
organization (classical organization
theory)

Nov
2011
 Scientific Management
theory
• Defined by Frederick WinslowTaylor (USA
1856-1915).
• The first person to recognize the need to
adopt a scientific approach to
management
• The systematic study of the relationships
between people and tasks to redesign the
work for higher efficiency.
– Taylor sought to reduce the time a worker
spent on each task by optimizing the
way the task was done.

Nov
2011
Taylor’s four principles
• The development of a true science
of
management, so that the best
methods for performing each task
could be determined.
• The scientific selection of workers,
so
that each worker would be given
• responsibility
The scientific education and
for the task for which
of the
he or she was best suited.
development
worker.
management
• Intimate, and cooperation
friendly
labor.
between

Nov
2011
• The principles required “Mental Revolution” on
the part of management and labor
• He introduced differential rate system.
Better rate for more efficient workers.
• He summed up his approach in these
words:
□Science, not rule of thumb
□Harmony, not discord
□Co-operation, not individualism
□Maximum output, in place of restricted
output
□The development of each man to his
greatest efficiency and prosperity.

Nov
2011
 Problems of scientific
management
1. Worker's Criticism:
• (a) Speeding up of workers
• (b) Loss of individual worker's
initiative:
• (c) Problem of monotony
• (d) Reduction of Employment
• (e) Weakening of Trade Unions
• (f) Exploitation of workers
2. Employer's Criticism:
• (a) Heavy Investment:
• (b) Loss due to re-organization:
• (c) Unsuitable for small scale firms:

Nov
2011
Henry Lawrence Gantt (USA, 1861 - :
1819)
• He worked with Taylor from 1887 - 1919
at Midvale Steel Company
Gantt’s contributions:
• Gantt chart to compare actual to
planned performance.
• Task-and-bonus plan aimed at
providing extra
wages for extra work besides guarantee
of minimum wages.
• Psychology of employee relations
indicating
management responsibility to teach and
train workers.
• He laid great emphasis on leadership.
Nov
2011
 The
Frank (USA, 1867 - 1924) and Lillian (U.S.A,
Gilbreths1878
- 1912)
• Frank and Lillian Gilbreth refined
Taylor’s methods.
– Made many improvements to time and
motion studies.
• Time and motion studies:
– 1. Break down each action into
components.
– 2. Find better ways to perform it.
– 3. Reorganize each action to be more
efficient.

• Gilbreths also studied fatigue problems,

lighting, heating and other worker issues.
• Gave a thought to the welfare of workers
• Gilbreth also devised methods for avoiding wasteful
andNovunproductive movements.
2011
 Administrative Management

• This approach to management, also

function and process approach is
primary based on the idea of Henry
Fayol (1841- 1925)
• His acute observations on the Principles
of general management first appeared
in 1916 in French
• He was the first person to discuss
management as a process with specific
functions that any manager should
perform

Nov
2011
 Industrial
activities
• Fayol divided industrial undertakings in to
six groups:

1.Technical (Production)
2. Commercial (buying, Selling and
exchanging).
3. Financial (Search for, and optimum use of
capital).
4. Security (Protection of property and
persons).
5. Accounting (including Statistics).
6. Managerial (Planning, organization,
command, coordination and control).
• Fayol observed that first five were well
known
andNov
he devoted most of his book to an
analysis
2011 of the sixth.
 Fayol’s
1.
Principles
Division of Labor: allows for
job specialization.
• Fayol noted firms can have too much
specialization leading to poor quality and
worker involvement.
2.Authority and Responsibility: Fayol
included both formal and informal
authority resulting from special expertise.
3.Unity of Command: Employees should
have only one boss.
4.Line of Authority: a clear chain from top
to bottom of the firm.
5.Centralization: the degree to
which authority rests at the very
top.
Nov
2011
 Fayol’s
Principles
6.Unity of Direction: One plan of action
to guide the organization.
7.Equity: Treat all employees fairly in
justice andrespect.
8.Order: Each employee is put where
they have the most value.
9. Initiative: Encourage innovation.
10.Discipline: obedient, applied,
respectful employees needed.

Nov .
2011
 Fayol’s
Principles
11.Remuneration of Personnel: The
payment system contributes to
success.
12.Stability of Tenure: Long-
term employment is
important.
13.General interest over individual
interest: The organization takes
precedence over the individual.
14.Esprit de corps: Share enthusiasm
or devotion to the organization.

Nov
2011
 Theory of Bureaucracy
• Developed by Max Weber (1864-
1920).
• Bureaucracy refers to the formal
structural process within an
organization.
• Weber’s “pure form” of organization is
characterized by rationality
and impersonality.
• Rationality refers to how the
parts of
organizations are designed and
coordinated to achieve specific
ends.
• Impersonality implies objectivity
in Novinterpersonal .relations
2011
 Bureaucratic
Principles

Written
Written rules
rules

System
System ofof task A Bureaucracy Hierarchy
Hierarchy of
of
relationships
task authority
authority
relationships
should have

Fair
Fair
evaluation
evaluation
and
and reward
reward

Nov
2011
 Key points of
Bureaucracy
Authority is the power to hold people accountable for
their actions.
Positions in the firm should be held based on
performance
not social contacts.
Position duties are clearly identified. People should
know what is expected of them.
Lines of authority should be clearly identified.
Workers know who reports to who.
Rules, Standard Operating Procedures (SOPs), &
Norms
used to determine how the firm operates.
• Advantages: precision, speed, un ambiguity, continuity,
unity, strict subordination and the like.
• Disadvantages: red -tape or excessive procedure,
rigidity, and neglect of the human factor.

Nov .
2011
Contributions of Classical
management
thought
Contributions:
• Identified the field of management and
its process and functions
• Job analysis, work simplification,
incentive wage systems, etc.
• The application of the idea of
productivity and efficiency to many
organization
• Provision of guidelines and principles
that tend to be important to all types
of organizations
Nov
2011
 Limitation
s
• Insights from classical
management are simplistic for
today’s complex organizations
• Reliance on experience
• Untested assumptions
• Failure to consider
informal organizations
• Human machinery

Nov .
2011
 Neo Classical
• Theories
Modified, improved, and
extended the classical
management approach
• Two branches: Human
Relations approach and
behavioral approach

Nov .
2011
 Human relations
Approach
• Hawthorne studies Led by Elton Mayo (AUS 1880 –
1949)
• Study of worker efficiency at the Hawthorne
Works of the Western Electric Co. during
1924-1932.
– Worker productivity was measured at various
levels of light illumination.
– Researchers found that regardless of whether the
light levels were raised or lowered, productivity
rose.
• Actually, it appears that the workers
• enjoyed the
Informal work attention
groups and thethey
socialreceived asofpart
environment
of the study
employees have and were
positive moreonproductive.
influence
• Employee’s
productivity.motivation is based on both
socio-psychological
physiological, and
needs.

Nov
2011
 Behavioral science approach
• Man is much more complex than
the “economic man” and “social
man” descriptions
• This approach concentrates more on
the nature of the work itself, and the
degree to which it can fulfill the
human need
• also focused on communication,
motivation and leadership areas.
• Contributors: Elton Mayo,
Douglas McGregor, Abraham
Maslow, etc.
Nov
2011
 McGregor’s Theory X and Theory
Y
• Douglas McGregor proposed the two
different sets of worker
assumptions.
 TheoryX: Assumes the average worker is
lazy, dislikes work and will do as little as
possible.
• Managers must closely supervise and control
through reward and punishment.
 TheoryY: Assumes workers are not lazy,
want to do a good job and the job itself
will determine if the worker likes the work.
• Managers should allow the worker great latitude,
and create an organization to stimulate the
worker.
Nov .
2011
 Theory X v. Theory
Y

Theory
Theory Theory
Theory
XX YY

Employee
Employee is
is lazy
lazy Employee
Employeeisisnot
notlazy
lazy

Managers
Managers must
must Must
Must create
create work
work
closely
closely setting
setting toto build
build
supervise
supervise initiative
initiative

Create
Create strict
strict rules
rules & Provide
Provide authority
authority
defined
& definedrewards to
to workers
workers
rewards

Nov .
2011
 Modern Theories
• further refinement, extension,
and synthesis of all the
classical and neoclassical
approaches to management
• Link the twin primary objectives
of productivity (classical
approach) and employee
satisfaction (neoclassical
approach)

Nov
2011
 The Management Science
Approach
• Uses rigorous quantitative techniques
to maximize resources.
Quantitative management: utilizes linear
programming, modeling, simulation
systems.
Operations management (Research):
techniques
to analyze all aspects of the
production system.
Egs. Critical path method (CPM), Economic
order quantity (EOQ)
Total Quality Management (TQM): focuses
on improved quality.
Management Information Systems (MIS):
provides information about the
organization.
Nov .
2011
 Organization-Environment
•Theory
Considers relationships inside and
outside the organization.
– The environment consists of forces,
conditions, and influences outside the
organization.
• Systems theory considers the impact
of stages:
Input: acquire external resources.
Conversion: inputs are processed into goods
and services.
Output: finished goods are released into
the environment.

Nov .
2011
 Systems
• Considerations
System: A set of interrelated parts that
work together to achieve an objective.
• Subsystems: Those parts making up the
whole system.
• An open system interacts with the
environment. A closed system is
self- contained.
– Closed systems often undergo entropy and
lose the ability to control itself, and fails.
• Synergy: performance gains of the
whole surpass the components.
– Synergy is only possible in a
coordinated system.

Nov
2011
 The Organization as an Open
System

Input Stage Conversion Output

Information Stage Stage
Raw
Materials
Energy Machines Goods
Human Services
skills

Sales of outputs
Firm can then buy inputs

Nov
2011
 Contingency
Theory
• Assumes there is no one best
way to manage.
– The environment impacts the
organization and managers
must be
flexible to react to
environmental changes.
– The way the organization is
designed,
control systems selected, depend on
the environment.
• Technological environments
change rapidly, so must
managers.
Nov
2011
 Emerging Trends in
Management
• Individual assignment to write a
one page summary bout the
following trends and
management contributor:
• TQM and Six Sigma
• BPR
• Theory Z
• Peter F. Drucker (November
19, 1909– November 11,
2005)
Nov
2011