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  • 1. 2-1 Unit 2Development &Evolution ofManagement Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 2. 2-2 Evolution of Management thought- Classical ApproachAlso known as Functional approach, Empirical approach and Management process approach.Its main features are:1. Mgt is viewed as systematic network of various functions.2. Based on the experience of the managers, mgt thoughts were developed.3. Universal application of management.4. Education, economic efficiency & training were emphasized.5. Formal organization structure.6. People are motivated by economic gains.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 3. 2-3 Advantages of Classical approach 1. Focuses on what managers actually do. 2. Highlights the universal nature of management. 3. Scientific basis for managerial practice. 4. Plays important role in conducting future research in the area of management. But suffers from the following limitations: 1. Ignores environment. 2. Relies too much on past experience. 3. Oversimplified assumptions 4. Mechanistic frameworkIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 4. 2-4 Pillars of classical approach Bureaucracy Scientific management Administrative theoryIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 5. 2-5 Bureaucracy Max Weber, a German Social scientist, developed the concept of bureaucracy. He analyzed the formal system of organization and administration to ensure effectiveness and efficiency.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 6. 2-6 Bureaucratic Principles Written rules System of task A Bureaucracy Hierarchy of relationships should have authority Fair evaluation and rewardIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 7. 2-7 Key features of Bureaucracy  Division of work  Rules, Standard Operating Procedures (SOPs), & Norms used to determine how the firm operates.  Hierarchy of authority  Technical competence  Record keeping  Impersonal relationsIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 8. 2-8 Bureaucracy Advantages Disadvantages Specialization Rigidity Structure Goal displacement Rationality Impersonality Predictability Compartmentalisation of Democracy activities. Paperwork Empire building Red tapeIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 9. 2-9 Scientific Management theory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 mix.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 10. 2-10 Job specialization Adam 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 11. 2-11 Scientific Management Defined by Frederick Taylor, late 1800’s. 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 12. 2-12 The 4 Principles Four Principles to increase efficiency: 1. Study the way the job is performed now & determine new ways to do it.  Gather detailed, time and motion information.  Try different methods to see which is best. 2. Codify the new method into rules.  Teach to all workers. 3. Select workers whose skills match the rules set in Step 2. 4. Establish a fair level of performance and pay for higher performance.  Workers should benefit from higher output.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 13. 2-13 Problems of Scientific Management Managers often implemented only the increased output side of Taylor’s plan.  They did not allow workers to share in increased output.  Specialized jobs became very boring, dull.  Workers ended up distrusting Scientific Management. Workers could purposely “under-perform” Management responded with increased use of machines.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 14. 2-14 Major schools of mgt thoughtsMgt process school – mgt as a process of getting things done with people operating in organized groups.Empirical school – mgt is the study of experienceHuman relations – mgt is centred on inter personal relations.Social system school – views mgt as a social systemDecision theory school – scientific approach to decision.Mathematical schoolSystems approach schoolContingency approach schoolIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 15. 2-15 Fayol’s Principles Henri Fayol, developed a set of 14 principles: 1. 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 16. 2-16 Fayol’s Principles 6. Unity of Direction: One plan of action to guide the organization. 7. Equity: Treat all employees fairly in justice and respect. 8. Order: Each employee is put where they have the most value. 9. Initiative: Encourage innovation. 10. Discipline: obedient, applied, respectful employees needed.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 17. 2-17 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 18. 2-18 Behavioral Management Focuses on the way a manager should personally manage to motivate employees. Mary Parker an influential leader in early managerial theory.  Suggested workers help in analyzing their jobs for improvements.  The worker knows the best way to improve the job.  If workers have the knowledge of the task, then they should control the task.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 19. 2-19 The Hawthorne Studies 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 attention they received as part of the study and were more productive.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 20. 2-20 Theory X and Y Douglas McGregor proposed the two different sets of worker assumptions.  Theory X: 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.  Theory Y: 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 21. 2-21 Theory X v. Theory Y Theory X Theory Y Employee is lazy Employee is not lazy Managers must closely supervise Must create work setting to build Create strict rules initiative & defined rewards Provide authority to workersIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 22. 2-22 Theory ZWilliam Ouchi researched the cultural differences between Japan and USA.  USA culture emphasizes the individual, and managers tend to feel workers follow the Theory X model.  Japan culture expects worker committed to the organization first and thus behave differently than USA workers.Theory Z combines parts of both the USA and Japan structure.  Managers stress long-term employment, work-group, and organizational focus.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 23. 2-23 Management Science Uses rigorous quantitative techniques to maximize resources. Quantitative management: utilizes linear programming, modeling, simulation systems. Operations management: techniques to analyze all aspects of the production system. Total Quality Management (TQM): focuses on improved quality. Management Information Systems (MIS): provides information about the organization.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 24. 2-24 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 25. 2-25 Systems Considerations 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 26. 2-26The Organization as an Open System Input Stage Conversion Output Stage Stage Raw Materials Machines Goods Human skills Services Sales of outputs Firm can then buy inputsIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 27. 2-27 The Organization as an Open SystemIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 28. 2-28 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.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 29. 2-29 Structures Mechanistic: Authority is centralized at the top. (Theory X)  Employees closely monitored and managed.  Very efficient in a stable environment. Organic: Authority is decentralized throughout employees. (Theory Y)  Much looser control than mechanistic.  Managers can react quickly to changing environment.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 30. 2-30 Management By Objective (MBO)Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 31. 2-31 Management By Objectives (MBO) “objective are goals, aims or purposes that organisation wish over varying periods of time. Designed by Peter Drucker, MBO is a method whereby managers and employees define objectives for every department, project, and person and use them to monitor subsequent performance.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 32. 2-32 MBO is a program that encompasses:  specific goals  participatively set  for an explicit time period  with feedback on goal progress MBO operationalizes the concept of objectives by devising a process by which objectives cascade down through the organization. According to Drucker, mgt has two imp functions: 1. Innovation 2. MarketingIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 33. 2-33 He said modern org are knowledge based firms and their workers are knowledge workers. Org to achieve the purpose & mission follow: 1. Make the work productive & worker achieving 2. Effective mgt of social responsibility Acc to him, objectives shd be set all the KRAs. MBO shd be done together by superior & subordinates.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 34. 2-34 Federalism Drucker also propounded Federalism. It involves centralised control in a decentralised structure. It makes top mgt devote for policy making. Defines functions & responsibilities of employees. Creates yardstick for measure their performance. Continuity in educating the employees.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 35. 2-35 CoordinationIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 36. 2-36 Meaning & definition In every organisation, different types of work are performed by various groups and no single group can be expected to achieve the goals of the organisation as a whole. Hence, it becomes essential that the activities of different work groups and departments should be harmonised. This function of management is known as ‘co- ordination’.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 37. 2-37 Acc to E F L Brech, Coordination is balancing & keeping together the team by ensuring suitable allocation of task to the various members and seeing that tasks are performed with due harmony among the members themselves. It is the centre point of managerial tasks.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 38. 2-38 Characteristics of Coordination Represents core function Purpose is to achieve common objective Continuous process. It is the result of concerted (combined) action. PRINCIPLES OF COORDINATION 1. Early start 2. Direct personal contact 3. Continuity 4. IntegrationIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 39. 2-39 Need for coordination Increasing specialization Empire building Harmony within the group To attain common interest between mgt & worker.Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 40. 2-40 Types of coordination Internal & External Vertical & Horizontal Procedural & Substantive (General & specific)Irwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000
  • 41. 2-41 Techniques of Coordination Sound planning Simplified organisation Effective communication Effective supervision Associated departmentIrwin/McGraw-Hill ©The McGraw-Hill Companies, Inc., 2000