Management Theories: Evolution and Modern Practices
Evolution of Management Theories
Classical Management Theory (1880-1930)
- Scientific Management by F.W. Taylor
- Administrative Management by Henri Fayol
- Bureaucratic Management by Max Weber
Neoclassical Management Theory (1930-1950)
- Human Relations Movement
- Behavioral Sciences Movement
Modern Management Theory (1950 Onwards)
- Quantitative Approach
- System Approach
- Contingency Approach
Classical Management Theory
1. Scientific Management
Frederick W. Taylor (Chief Engineer in Bethlehem Steel Company, USA) – Father of Scientific Management. According to Taylor, scientific management is an art of knowing exactly what you want your men to do and seeing that they do it in the best and cheapest way.
Steps in Scientific Management
- Analyze the work scientifically.
- Divide work and responsibility.
- Select workers best suited to perform specific tasks.
- Provide guidelines for worker performance.
- Achieve support and cooperation from workers.
Principles of Scientific Management
- Replacing rules of thumb with science.
- Obtaining harmony, rather than discord in group action.
- Achieving cooperation of human beings.
- Working for maximum output, rather than chaotic individualism.
- Developing all workers to the fullest extent possible for their own and their company’s highest prosperity.
Techniques of Scientific Management
- Scientific study and planning of work.
- Scientific selection, placement, and training.
- Standardization of raw materials, machines, and working conditions.
- Division of responsibility between managers and workers.
- Functional foremanship.
- Mental revolution.
- Wage incentives.
2. Administrative Theory of Management
Henri Fayol was a French Mining Engineer and Chief Administrator in a French mining and metallurgical company. Fayol believed that a manager’s job could be divided into five functions:
- Planning and forecasting
- Organizing
- Commanding
- Coordinating
- Controlling
Fayol’s 14 Principles of Management
- Division of work
- Authority and responsibility
- Discipline
- Unity of command
- Unity of direction
- Subordination of individual’s interest to the organization.
- Remuneration
- Centralization of authority
- Scalar chain
- Order of resources
- Equity
- Stability of tenure of personnel
- Initiative
- Esprit-de-corps/Team spirit
Managerial Skills
- Physical ability: Health, vigor, personality
- Mental ability: Ability to learn, to take decisions, creativity
- Moral education: Loyalty, dignity, ethical values
- General education
- Special knowledge
- Experience
3. Bureaucratic Model of Organization
It was developed by Max Weber, a German social scientist. It is a more efficient form of organization because it aims at a high degree of precision, efficiency, objectivity, and rationality. This form of organization is popular in government and military organizations.
Characteristics of the Bureaucratic Model
- Division of labor
- Hierarchy of authority
- Rigidity in compliance with procedure and framework of rules
- Impersonality
- Technical competence
II. Behavioral Approach to Management
Human Relations Movement by Elton Mayo and McGregor. It is based on a strong conviction that efficient management depends on the manager’s ability to understand work as well as people who have different backgrounds, needs, values, perceptions, and personalities.
Behavioral Approach to Management
Human Relations Movement
The Hawthorne Studies and its findings provide a concrete base to the human relation approach. The Hawthorne studies mainly consist of the following studies:
- Illumination experiment
- Relay assembly test room experiment (Individual)
- Massive interviewing program
- Bank wiring observation room experiment (group)
2. Behavioral Science Approach
It is defined as a scientific analysis of human behavior to determine the causes of the working behavior of an individual. This is an interdisciplinary approach to studying human behavior consisting of psychology, sociology, and anthropology.
Modern Approach
- Quantitative approach
- System approach
- Contingency approach
- Attributes of excellence
1. Quantitative Approach
- Dividing the problem into small, simple components
- Gathering required information on each component
- Analysis of data so collected
- Finding out the solutions to the problem in hand
2. System Approach
The term ‘system’ may be defined as a set of interrelated and interacting components assembled in a particular sequence so as to produce some results. An organization consists of various systems, and every system has a subsystem and has certain boundaries. Beyond these boundaries, there exists an external environment that is outside the control of the system. The external environment includes sociocultural, economic, legal, political, and technical factors.
3. Contingency Approach
This approach basically discounts the concept of universal application of managerial principles. It recommends that the application of the principles is subject to the appropriateness of the situation. It is a systematic attempt to determine the package of management techniques, approaches, and practices that are appropriate to a given situation.
Contributions of F. W. Taylor
- Taylor pioneered the time and motion study.
- Taylor advocated the scientific study of the task – which led to the concept of scientific management.
- Another concept of Taylor was ‘A Fair Day’s Task’.
- The concept of functional organization was suggested by Taylor.
- Taylor suggested a wage incentive scheme known as ‘Taylor’s Differential Piece Rate Plan’.
Contributions of Fayol
Henry Fayol – the father of Modern Management. In contrast to Taylor’s emphasis on first-line supervision in production areas, Fayol’s work was concerned with higher levels of organization. According to Fayol, all work done in a business enterprise can be divided into six groups:
- Technical activities
- Commercial activities
- Financial activities
- Security activities
- Accounting activities
- Managerial activities
14 Principles of Management by Henry Fayol
- Division of work
- Authority and responsibility
- Discipline
- Unity of command
- Unity of direction
- Remuneration
- Degree of centralization
- Equity of treatment
- Stability
- Initiative
- Order
- Scalar chain
- Subordination of individual to general interest
- Esprit de corps
Contributions of Gantt
- Gantt’s contributions were more in the form of refinements rather than fundamental concepts.
- He improved Taylor’s ‘Differential Piece Rate System’ and brought out his ‘Task and Bonus Plan’.
- Gantt developed the daily balance chart, now known as the Gantt Chart.
- Gantt pleaded for wider recognition of the human factor in management.
- Gantt also pleaded for a policy of preaching and teaching workmen rather than driving the workers like cattle.
- Gantt was of the opinion that emphasis should be placed on service rather than profits.
Contributions of Gilbreth
- Frank and Lillian Gilbreth did a lot of work in order to improve work methods and to discover one best method of establishing it – their main field of interest was movement/motion study.
- In 1917, Gilbreth suggested the first definition of motion study as “the science of eliminating wastefulness resulting from unnecessary, ill-directed, and inefficient motions”.
- Gilbreth developed ‘therbligs’ – a list of 17 basic motions to help analyze any worker’s movement.
- He developed micro-motion study and the SIMO chart.
- Gilbreth applied motion analysis to office procedures.
- Gilbreth and Lillian, based on their study on fatigue and its elimination, found out that fatigue can be eliminated by lighting the load, spacing the work, and by introducing rest periods.
Time Study
It is the direct observation of a task, using a time-keeping device (stopwatch, video camera, etc.) to record the time taken to accomplish a task.
Motion Study
It is the analysis of work motion, consisting in part of filming the details of a worker’s activities and their body posture while recording the time.
SIMO Chart
Simultaneous Motion cycle chart. It is based on the video, therbligs performed by different parts of the body of one or more operators, are recorded simultaneously on a common time scale, and unnecessary activities are eliminated to get the best way of doing the job.
Motivation Theories
- Maslow’s theory of Hierarchy of Needs
- McGregor’s Theory X and Theory Y
- William Ouchi’s Theory Z of Motivation
- Herzberg’s Two-Factor theory
Theory ‘X’ – Negative Approach
- The average person dislikes work and whenever possible, will avoid it.
- Most people are not ambitious, have little desire for responsibility.
- To make people work, it is necessary to use strict control, threats, constant pressure, and even punishment.
- Most people have little capacity for creativity in solving organizational problems.
- People actually like to be directed and supervised very closely.
Theory ‘Y’ – Positive Approach
- It assumes people are not lazy and unreliable in nature.
- They enjoy work, show initiative, and imagination in self-direction and self-control.
- Work is a natural activity like playing and taking rest if conditions are favorable.
- Close supervision and threats of punishment are not the only way to make people work.
- Motivation occurs at the social esteem and self-actualization levels.
- People are self-directed and creative at work if properly motivated.
William Ouchi’s Theory ‘Z’ of Motivation
- Mutual trust between members.
- Strong bond between the organization and employees.
- Employee Involvement.
- Integrated organization
- Coordination.
- Human Resource Development.
Herzberg’s Two-Factor Theory
1. Hygiene Factor or Maintenance – Removes Discomfort
- Company policies and administration
- Supervision
- Interpersonal relations
- Working conditions
- Pay
- Job security
- Personal life and status
2. Motivational Factors – Real Motivators
- Advancement
- Achievements
- Possibility of growth
- Recognition and responsibility
McKinsey 7S Framework
- Strategy: Plan or goal
- Structure: Division or units
- Systems: Processes or procedure
- Shared values: Norms and standards
- Style: Culture
- Staff: Employees
- Skills: Abilities
7S Framework is used to facilitate organizational change, to implement a new strategy, to identify how each area changes in the future, and to facilitate the merger of organizations.
Corporate Social Responsibility (CSR)
CSR is the continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of the life of the workforce and their families. CSR focuses on the idea that business has social obligations above and beyond making a profit. CSR follows a decision to expand traditional governance arrangements to include accountability to the full range of stakeholders. CSR is a way of interacting the economic, social, and environmental imperatives of business activities.
Need for CSR
- A customer wants to buy products from companies he trusts.
- A supplier wants to form a business partnership with companies he can rely on.
- An employee wants to work for a company he respects.
Significance of CSR
- Reduction in operation cost – recycling, energy conservation, etc.
- Increased sales and customer loyalty
- Higher productivity
- Access to capital
- Boost in brand image and reputation
Guidelines for Ethical Behavior
- Obey the Rules
- Tell the Truth
- Respect for People
- Golden rule – “Treat others as you want to be treated”
- Do no harm to the Environment and Human beings.
- Practice Participation
- Act when you have Responsibility
Importance of Planning
- Planning provides direction
- Planning reduces the risk of uncertainty
- Planning reduces uncertainty and wasteful activities.
- Planning promotes innovative ideas
- Planning facilitates decision-making.
- Planning establishes standards for controlling
- Economical Utilization of resources
- Effectiveness
- Coordination
Types of Plans
- Purpose or missions
- Objectives
- Strategies
- Policies
- Procedures
- Rules
- Programs
- Budgets
Distinction Between Objectives and Policies
Objectives
- Ends towards which all activities of an organization are directed.
- What is to be done
- Endpoints of planning
- Determined by top management
- One objective may require more than one policy
- Derived from the philosophy of business
- Indicate the destination
- Basic to the very existence of an organization
Policies
- Guidelines which facilitate the accomplishment of predetermined objectives.
- How the work is to be done
- Means by which objectives are to be done.
- Formulated at top and middle levels
- Every policy is one particular objective
- Derived from objectives and provide meaning and content to objectives
- Provide the route
- Not basic to existence
Distinction Between Policies and Procedure
Policies
- General guides to thinking and decision-making.
- Expression of management’s attitude towards certain issues
- May change as per executive discretion and judgment
- Lay down a broad area
- Provide a bridge between purpose and performance
- Provide norms for thinking and discretion
- Form part of strategies
- Derived from objectives
Procedures
- Operational guides to action.
- Systematic ways of handling routine
- No change for reflection and deviation
- Provide a route through the area
- Provide a bridge between activity and outcomes
- Detailed and rigid
- Serve as tactical and operational tools
- Derived from policies
Distinction Between Policies and Rules
Policies
- A general statement
- Guide to decision-making
- Lay down management attitude
- Flexible, may have some exceptions
- Provide discretion during implementation
Rules
- A most specific statement
- Guide to behavior
- Indicate what should or should not be done
- Rigid, no exceptions or deviations
- Provide no scope for discretion
Distinction Between Policies and Strategies
Policies
- Guides to thinking and action of those who make decisions.
- Guidelines for making decisions in repetitive situations.
- Taken for problems about which facts are known.
- Implementation of policy can be delegated.
- Standing plan or long-lasting
- Not based specifically on the moves of competitors
Strategies
- Provide direction in which human and physical resources will be deployed.
- Contingent decision.
- Taken for problems where alternatives cannot be analyzed in advance.
- Implementation of strategy cannot be delegated as it requires last-minute execution decisions.
- Non-repetitive plans may need frequent revision.
- Formulated according to competitors’ moves
Management by Objectives (MBO)
It is a process whereby managers and employees jointly identify the common goals/objectives of the enterprise and individuals and use these objectives as guidelines to monitor subsequent performance. MBO implies managing by identifying the objectives of an organization. IN SIMPLE WORDS, MBO IS… MBO emphasizes the importance of objectives as a tool to be used by managers in fulfilling their managerial roles (accomplish their tasks). Divide the problem into manageable, “bite-size” chunks.
Features of MBO
Peter Drucker also stated that:
- For the business to succeed, the managers and employees must work towards a common goal.
- It pays constant attention to refining, modifying, and improving the goals and changing the approaches to achieve the goals on the basis of experience.
- Managers must identify and agree on targets for achievement with subordinates.
- Managers must negotiate the support needed to achieve the targets with subordinates.
- Evaluate the objectives over time.
MBO Principles
- Cascading of Organizational goals and Objectives
- Specific objectives for each Team member
- Participative Decision Making
- Explicit Time period
- Performance evaluation and Feedback
Maslow’s Needs Theory
“We each have a hierarchy of needs that ranges from “lower” to “higher.” As lower needs are fulfilled there is a tendency for other, higher needs to emerge.” Daniels, 2004