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Management thought

  1. 1. Management Theory Management Thought ERWIN ABAD DEPARTMENT OF HEALTH – FINANCE SERVICE RAMON A VICTOR, Ph.D. FEBRUARY 7, 2013 1
  2. 2. Table of Contents I. Executive Summary II. 1 The Classical School Scientific Management Bureaucratic Management 10 Administrative Management 13 Limitations of the Classical School III. 5 20 The Behavioral School Human Relations Behavioral Science IV. 24 26 The Modern Management School Decision Theory 29 Management Science and MIS 30 Production and Operations Management 33 Systems Theory 34 Contingency Theory 40 Bibliography 2
  3. 3. Executive Summary Awareness and understanding of important historical developments are also important to managers. The history of management theories helps managers by organizing information and providing a systematic framework for action. The concept of management is not new; it has been practiced for thousands of years, although terms such as management principles or management theory may not have been used. The Sumerians, the Babylonians, or the Romans have provided numerous illustrations of effective management. In terms of longevity, "the most effective formal organization in the history of Western civilization has been the Roman Catholic Church" (Harold Koontz and Cyril O'Donnell). However, management gained in importance, as mankind progressed and moved into the Industrial Revolution era. Today's concept of management is the product of a long and complicated evolutionary process. Essentially, four major forces affect management are economic, social, political-legal, and technological. Most thought of practice of management are needed to be refined and synthesized to call them management principles. The early ―autocratic period‖ of management is characterized by the use of absolute authority, coercion and force, with strategies like ―fear of God‖. The history of Management as a discipline is traced from the 19th century. Development of a unified and integrated management theory out of the 3
  4. 4. management theory ―jungle‖ has some difficulties like applied science nature of the subject, lack of coherent theoretical concepts of its own and heavy reliance on concepts borrowed from other disciplines. A number of more or less separate schools of management thought have emerged since the end of the 19 th century and each sees management from its own viewpoint. There are many ways of classifying these theories or schools. One broad way of grouping management theories is to group them as classical, behavioral/ neoclassical and modern management schools. The classical management theory is referred to the period between 1880s to 1920s. This phase consists of Scientific management of F.W. Taylor and his followers, Administrative management of Henry Fayol and others and Bureaucratic organization of Max Weber. The classical theory emphasized the economic rationality of management and organization and suggested to determine the best way to perform a job. This theory is criticized for its assumption that people are motivated primarily by economic reward. The Behavioral or Neo-classical theory, which is identified with the period from 1920s to 1950s, is concerned with the human oriented approach and emphasized the needs, drives, behaviors and attitudes of people. The human relations schools together with (early) behavioral schools constitute this group. The social person view of employees is the basis of this set of schools. The famous Hawthorne experiment 4
  5. 5. conducted by Mayo, Roethlisberger and Dickson is a milestone in the endeavors of this school. Several behavioral scientists including Maslow, McGregor and Herzberg have contributed to this school as well as to production and operations management under the modern management theory. This school is criticized for its overemphasis on human variables and symbolic rewards which may not be well appreciated by the recipients. The complex employee view has become the basis of modern management theory, which began around 1950s. This group tried to test the views of earlier schools and accept them selectively. In the process it has made use of many tools like computers and mathematical techniques and theories from other disciplines like systems theory, decision theory, contingency theory and management science. There are many more names of schools and classifications of management thoughts in the literature of management, but most of them overlap one another. Over the years, disagreement on exactly how many different approaches to management exist and what each approach entails has been common. 5
  6. 6. The schools of management thought are theoretical frameworks for the study of management. Each of the schools of management thought are based on somewhat different assumptions about human beings and the organizations for which they work. Since the formal study of management began late in the 19th century, the study of management has progressed through several stages as scholars and practitioners working in different eras focused on what they believed to be important aspects of good management practice. Over time, management thinkers have sought ways to organize and classify the voluminous information about management that has been collected and disseminated. These attempts at classification have resulted in the identification of management schools. Disagreement exists as to the exact number of management schools. Different writers have identified as few as three and as many as twelve. The formal study of management is largely a twentieth-century phenomenon, and to some degree the relatively large number of management schools of thought reflects a lack of consensus among management scholars about basic questions of theory and practice. THE CLASSICAL SCHOOL The classical school is the oldest formal school of management thought. Its roots pre-date the twentieth century. The classical school of thought generally concerns ways to manage work and organizations more efficiently. Three areas of study that can be grouped under the 6
  7. 7. classical school are scientific management, administrative management, and bureaucratic management. SCIENTIFIC MANAGEMENT In the late 19th century, management decisions were often arbitrary and workers often worked at an intentionally slow pace. There was little in the way of systematic management and workers and management were often in conflict. Scientific management was introduced in an attempt to create a mental revolution in the workplace. It can be defined as the systematic study of work methods in order to improve efficiency. Frederick W. Taylor was its main proponent. Other major contributors were Frank Gilbreth, Lillian Gilbreth, and Henry Gantt. Scientific management has several major principles. First, it calls for the application of the scientific method to work in order to determine the best method for accomplishing each task. Second, scientific management suggests that workers should be scientifically selected based on their qualifications and trained to perform their jobs in the optimal manner. Third, scientific management advocates genuine cooperation between workers and management based on mutual selfinterest. Finally, scientific management suggests that management should take complete responsibility for planning the work and that workers' primary responsibility should be implementing management's plans. Other important characteristics of scientific management include the scientific development of difficult but fair performance standards 7
  8. 8. and the implementation of a pay-for-performance incentive plan based on work standards. Scientific management had a tremendous influence on management practice in the early twentieth century. Although it does not represent a complete theory of management, it has contributed to the study of management and organizations in many areas, including human resource management and industrial engineering. Many of the tenets of scientific management are still valid today. The classical scientific branch arose because of the need to increase productivity and efficiency. The emphasis was on trying to find the best way to get the most work done by examining how the work process was actually accomplished and by scrutinizing the skills of the workforce. Frederick Taylor is often called the ―father of scientific management.‖ Taylor began work at the age of 18 as a machinist apprentice to a pattern-maker. He later joined the Midvale Steel Company as a laborer and became chief engineer in eight years. During his period at the steel mill Taylor performed comprehensive experiments on worker productivity and tested what he called the "task system," later developed into the Taylor System and 8
  9. 9. eventually progressed into scientific management. Taylor believed that organizations should study tasks and develop precise procedures. As an example, in 1898, Taylor calculated how much iron from rail cars Bethlehem Steel plant workers could be unloading if they were using the correct movements, tools, and steps. The result was an amazing 47.5 tons per day instead of the mere 12.5 tons each worker had been averaging. In addition, by redesigning the shovels the workers used, Taylor was able to increase the length of work time and therefore decrease the number of people shoveling from 500 to 140. Lastly, he developed an incentive system that paid workers more money for meeting the new standard. Productivity at Bethlehem Steel shot up overnight. As a result, many theorists followed Taylor's philosophy when developing their own principles of management. Scientific management theory analyzes and synthesizes workflow processes and improving labor productivity. Scientific management is also called Taylorism, the Taylor system, or the Classical Perspective. The core ideas of the theory were developed by Frederick Winslow Taylor in the 1880s and 1890s, and were first published in his monographs, Shop Management (1905) and The Principles of Scientific Management (1911). Taylor believed that decisions based upon tradition and rules of thumb should be replaced by precise procedures developed after careful study of an individual at work. Taylor's experiments included determining the best way of performing each work operation, the time it required, materials needed and the 9
  10. 10. work sequence. He wanted to establish a clear division of labor between management and employees. Henry Gantt, an associate of Taylor's, developed the Gantt chart, a bar graph that measures planned and completed work along each stage of production. Based on time instead of quantity, volume, or weight, this visual display chart has been a widely used planning and control tool since its development in 1910. Frank and Lillian Gilbreth, a husband-and-wife team, studied job motions. In Frank's early career as an apprentice bricklayer, he was interested in standardization and method study. He watched bricklayers and saw that some workers were slow and inefficient, while others were very productive. He discovered that each bricklayer used a different set of motions to lay bricks. From his observations, Frank isolated the basic movements necessary to do the job and eliminated unnecessary motions. Workers using these movements raised their output from 1,000 to 2,700 bricks per day. This was the first motion study designed to isolate the best possible method of performing a given job. Later, Frank and his wife Lillian studied job motions using a motion-picture camera and a split-second clock. When her husband died at the age of 56, Lillian continued their work. Thanks to these contributors and others, the basic ideas regarding scientific management developed. They include the following: Developing new standard methods for doing each job 10
  11. 11. Selecting, training, and developing workers instead of allowing them to choose their own tasks and train themselves Developing a spirit of cooperation between workers and management to ensure that work is carried out in accordance with devised procedures Dividing work between workers and management in almost equal shares, with each group taking over the work for which it is best fitted Three Assumptions Underlying the General Principles of Scientific Management 1) Employers and employees have a shared goal in economic gain. 2) Man is rational and economically motivated 3) For every person, there is a job for which he is ideally suited. The scientific management is a 'manager centric' approach. The most fundamental aspect of scientific management is that the manager is primarily responsible for increasing an organization's productivity. Scientific management principles are to be applied by managers in a very specific fashion. 11
  12. 12. The shortcomings of the Scientific Theory had triggered the quest for more workable solutions and resulted in the formulation of bureaucratic management and administrative management theories. The scientific method was also got refined further during the course of time. BUREAUCRATIC MANAGEMENT Bureaucratic management focuses on the ideal form of organization. Max Weber was the major contributor to bureaucratic management. Based on observation, Weber concluded that many early organizations were inefficiently managed, with decisions based on personal relationships and loyalty. He proposed that a form of organization, called a bureaucracy, characterized by division of labor, hierarchy, formalized rules, impersonality, and the selection and promotion of employees based on ability, would lead to more efficient management. Weber also contended that managers' authority in an organization should be based not on tradition or charisma but on the position held by managers in the organizational hierarchy. Bureaucracy has come to stand for inflexibility and waste, but Weber did not advocate or favor the excesses found in many bureaucratic organizations today. Weber's ideas formed the basis for modern organization theory and are still descriptive of some organizations. 12
  13. 13. Max Weber (1864-1920) a German sociologist, was a teacher at Berlin University. He was a chief exponent of a bureaucratic model. Bureaucratic organization, in Weber’s views, is the most efficient form of organization. In the late 1800s, he disliked that many European organizations were managed on a ―personal‖ family-like basis and that employees were loyal to individual supervisors rather than to the organization. He believed that organizations should be managed impersonally and that a formal organizational structure, where specific rules were followed, was important. In other words, he didn't think that authority should be based on a person's personality. He thought authority should be something that was part of a person's job and passed from individual to individual as one person left and another took over. This non personal, objective form of organization was called a bureaucracy. 13
  14. 14. According to Weber the major characteristics of bureaucracy are: A well defined hierarchy All positions within a bureaucracy are structured in a way permitting the higher positions to supervise and control the lower positions. This provides a clear chain of command facilitating control and order throughout the organization. Division of labor and specialization All responsibilities in an organization are streamlined in a way that each employee will have the necessary expertise to master a particular task. This necessitates granting each employee the requisite authority to complete all such tasks. Rules and regulations All organizational activities are streamlined in a way that standard operating procedures are developed to provide certainty and facilitate coordination. Impersonal relationships between managers and employees Weber believed that managers should maintain an impersonal relationship with the employees so that the managers will be free to take rational decisions rather than one influenced by favoritism and personal prejudice. This organizational atmosphere would also 14
  15. 15. facilitate rational evaluation of employee outcomes where personal prejudices shall not interfere. Competence Competence should be the basis for all decisions made in hiring, job assignments, and promotions. This would encourage ability and merit as the most important characteristics of a bureaucratic organization. Records Weber felt it is absolutely essential for a bureaucracy to maintain complete files regarding all its activities. This necessitates an accurate organizational "memory" where accurate and complete documents will be available concerning all bureaucratic actions and decisions. ADMINISTRATIVE MANAGEMENT Administrative management focuses on the management process and principles of management. In contrast to scientific management, which deals largely with jobs and work at the individual level of analysis, administrative management provides a more general theory of management. Henri Fayol is the major contributor to this school of management thought. Fayol was a management practitioner who brought his experience to bear on the subject of management functions and principles. He 15
  16. 16. argued that management was a universal process consisting of functions, which he termed planning, organizing, commanding, coordinating, and controlling. Fayol believed that all managers performed these functions and that the functions distinguished management as a separate discipline of study apart from accounting, finance, and production. Fayol also presented fourteen principles of management, which included maxims related to the division of work, authority and responsibility, unity of command and direction, centralization, subordinate initiative, and team spirit. Although administrative management has been criticized as being rigid and inflexible and the validity of the functional approach to management has been questioned, this school of thought still influences management theory and practice. The functional approach to management is still the dominant way of organizing management knowledge, and many of Fayol's principles of management, when applied with the flexibility that he advocated, are still considered relevant. Henri Fayol French developed (1841-1925) mining 14 management a engineer, principles based on of his management experiences. These principles provide modern-day 16
  17. 17. managers with general guidelines on how a supervisor should organize her department and manage her staff. He spent his entire working career with a mining company, where he rose from an apprentice to General Manager. 1. Division of Work. Division of work, specialization, produces more and better work with the same effort. It focuses effort while maximizing employee efforts. It is applicable to all work including technical applications. There are limitations to specialization which are determined by its application. 2. Authority and responsibility. Authority is the right to give orders and the power to exact obedience. Distinction must be made between a manager's official authority deriving from office and personal authority created through individual personality, intelligence and experience. Authority creates responsibility. 3. Discipline. Obedience and respect between a firm and its employees based on clear and fair agreements is absolutely essential to the functioning of any organization. Good discipline requires managers to apply sanctions whenever violations become apparent. 4. Unity of command. An employee should receive orders from only one superior. Employees cannot adapt to dual command. 5. Unity of direction. Organizational activities must have one central authority and one plan of action. 17
  18. 18. 6. Subordination of Individual Interest to General Interest. The interests of one employee or group of employees are subordinate to the interests and goals of the organization and cannot prevail over it. 7. Remuneration of Personnel. Salaries are the price of services rendered by employees. It should be fair and provide satisfaction both to the employee and employer. The rate of remuneration is dependent on the value of the services rendered as determined by the employment market. 8. Centralization. The optimum degree of centralization varies according to the dynamics of each organization. The objective of centralization is the best utilization of personnel. 9. Scalar chain. A chain of authority exists from the highest organizational authority to the lowest ranks. While needless departure from the chain of command should be discouraged, using the "gang plank" principle of direct communication between employees can be extremely expeditious and increase the effectiveness of organizational communication. 10. Order. Organizational order for materials and personnel is essential. The right materials and the right employees are necessary for each organizational function and activity. 11. Equity. In organizations equity is a combination of kindliness and justice. The desire for equity and equality of treatment are aspirations to be taken into account in dealing with employees. 18
  19. 19. 12. Stability of Tenure of Personnel. In order to attain the maximum productivity of personnel, it is essential to maintain a stable work force. Management insecurity produces undesirable consequences. Generally the managerial personnel of prosperous concerns is stable, that of unsuccessful ones is unstable. 13. Initiative. Thinking out a plan and ensuring its success is an extremely strong motivator. At all levels of the organizational ladder zeal and energy on t he part of employees are augmented by initiative. 14. Esprit de Corps. Teamwork is fundamentally important to an organization. Creating work teams and using extensive face-toface verbal communication encourages this. Whereas scientific management focused on the productivity of individuals, the classical administrative approach concentrates on the total organization. The emphasis is on the development of managerial principles rather than work methods. Contributors to this school of thought include Max Weber, Mary Parker Follett, and Chester I. Barnard. These theorists studied the flow of information within an organization and emphasized the importance of understanding how an organization operated. 19
  20. 20. Mary Parker importance Follett of establishing stressed an common the organization goals for its employees. However, she also began to think somewhat differently than the other theorists of her command-style day, discarding hierarchical organizations where employees were treated like robots. She began to talk about such things as ethics, power, and leadership. She encouraged managers to allow employees to participate in decision making. She stressed the importance of people rather than techniques — a concept very much before her time. As a result, she was a pioneer and often not taken seriously by management scholars of her time. But times change, and innovative ideas from the past suddenly take on new meanings. Much of what managers do today is based on the fundamentals that Follett established more than 80 years ago. Chester Barnard, who was president of New Jersey Bell Telephone Company, introduced the idea of the informal organization — cliques (exclusive groups of people) that naturally form within a company. He felt that these informal organizations provided necessary and vital communication functions for the overall organization and that they could help the organization accomplish its goals. Barnard felt that it was particularly important for managers to develop a sense of common purpose where a willingness to cooperate is strongly 20
  21. 21. encouraged. He is credited with developing the acceptance theory of management, which emphasizes the willingness of employees to accept that managers have legitimate authority to act. Barnard felt that four factors affected the willingness of employees to accept authority: The employees must understand the communication. The employees accept the communication as being consistent with the organization's purposes. The employees feel that their actions will be consistent with the needs and desires of the other employees. The employees feel that they are mentally and physically able to carry out the order. Barnard's sympathy for and understanding of employee needs positioned him as a bridge to the behavioral school of management, the next school of thought to emerge. The classical school (of management) has sought to define the essence of management in the form of universal fundamental functions. These, it was hoped, would form the cognitive basis for a set of relevant skills to be acquired, by all would-be managers through formal education. Body of the classical school's management thought was based on the belief that employees have only economical and physical needs, and that social needs and need for job-satisfaction either don't exist or are unimportant. Accordingly, this school advocates high specialization of 21
  22. 22. labor, centralized decision making, and profit maximization. See also behavioral school of management, contingency school of management, quantitative school of management, and systems school of management. Limitations of the Classical School of Management Classical theories and the principles derived from them continue to be popular today with some modifications. Many criticisms have been directed at the classicists. Reliance on Experience Many of the writers in the classical school of management developed their ideas on the basis of their experiences as managers or consultants with only certain types of organizations. For instance, Taylor's and Fayol's work came primarily from their experiences with large manufacturing firms that were experiencing stable environments. It may be unwise to generalize from those situations to others' especially to young, high-technology firms of today that are confronted daily with changes in their competitors' products. Untested assumptions Many of the assumptions made by classical writers were based not on scientific tests but on value judgments that expressed what they 22
  23. 23. believed to be proper life-styles, moral codes, and attitudes toward success. For instance, the classical approaches seem to view the life of a worker as beginning and ending at the plant door. Their basic assumption is that workers are primarily motivated by money and that they work only for more money. They also assume that productivity is the best measure of how well a firm is performing. These assumptions fail to recognize that employees may have wants and needs unrelated to the workplace or may view their jobs only as a necessary evil. Failure to Consider The Informal Organization In their stress on formal relationships in the organization, classical approaches tend to ignore informal relations as characterized by social interchange among workers, the emergence of group leaders apart from those specified by the formal organization, and so forth. When such things are not considered, it is likely that many important factors affecting satisfaction and performance, such as letting employees participate in decision making and task planning, will never be explored or tried. Unintended Consequences Classical approaches aim at achieving high productivity, at making behaviors predictable, and at achieving fairness among workers and between managers and workers; yet they fail to recognize that several unintended consequences can occur in practice. For instance, a heavy emphasis on rules and regulations may cause people to obey rules 23
  24. 24. blindly without remembering their original intent. Oftentimes, since rules establish a minimum level of performance expected of employees, a minimum level is all they achieve. Perhaps much more could be achieved if the rules were not so explicit. Human Machinery Classical theories leave the impression that the organization is a machine and that workers are simply parts to be fitted into the machine to make it run efficiently. Thus, many of the principles are concerned first with making the organization efficient, with the assumption that workers will conform to the work setting if the financial incentives are agreeable. Static Conditions Organizations are influenced by external conditions that often fluctuate over time, yet classical management, theory presents an image of an organization that is not shaped by external influences. Since many of these criticisms of the classical school are harsh, several points need to be made in defense of writers during this period. First, the work force was not highly educated or trained to perform many of the jobs that existed at the time. It was not common for workers to think in terms of what "career" they were going to pursue. Rather, for many, the opportunity to obtain a secure job and a level of wages to provide for their families was all they demanded from the work setting. Second, much of the writing took place when technology was undergoing a 24
  25. 25. rapid transformation, particularly in the area of manufacturing. Indeed, for many writers, technology was the driving force behind organizational and social change. Thus, their focus was on finding ways to increase efficiency. It was assumed that all humankind could do was to adapt to the rapidly changing conditions. Finally, very little had been done previously in terms of generating a coherent and useful body of management theory. Many of the classical theorists were writing from scratch, obliged for the most part to rely on their own experience and observations. Thus their focus is understandably narrow. As we know, F.W.Taylor, Henri Fayol, and Max Weber are outstanding contributors of Classical School of management thought who made great contribution and laid a foundation for most management principles. THE BEHAVIORAL SCHOOL The behavioral school or neo-classical of management thought developed, in part, because of perceived weaknesses in the assumptions of the classical school. The classical school emphasized efficiency, process, and principles. Some felt that this emphasis disregarded important aspects of organizational life, particularly as it related to human behavior. Thus, the behavioral school focused on trying to understand the factors that affect human behavior at work. 25
  26. 26. HUMAN RELATIONS According to the human relations school, the manager should possess skills for diagnosing the causes of human behavior at work, interpersonal communication, and motivating and leading workers. The focus became satisfying worker needs. If worker needs were satisfied, wisdom held, the workers would in turn be more productive. Thus, the human relations school focuses on issues of communication, leadership, motivation, and group behavior. The individuals who contributed to the school are too numerous to mention, but some of the best-known contributors include Mary Parker Follett, Chester Barnard, Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The human relations school of thought still influences management theory and practice, as contemporary management focuses much attention on human resource management, organizational behavior, and applied psychology in the workplace. ELTON W. MAYO - organizational scientist who founded the human relations movement - Focused on social factors influencing the workplace employees were treated Focused by on management the and way the relationships they formed with one another 26
  27. 27. The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety of researchers participated in the studies, including Clair Turner, Fritz J. Roethlisberger, and Elton Mayo, whose respective books on the studies are perhaps the best known. One of the major conclusions of the Hawthorne studies was that workers' attitudes are associated with productivity. Another was that the workplace is a social system and informal group influence could exert a powerful effect on individual behavior. A third was that the style of supervision is an important factor in increasing workers' job satisfaction. The studies also found that organizations should take steps to assist employees in adjusting to organizational life by fostering collaborative systems between labor and management. Such conclusions sparked increasing interest in the human element at work; today, the Hawthorne studies are generally credited as the impetus for the human relations school. 27
  28. 28. BEHAVIORAL SCIENCE Behavioral science and the study of organizational behavior emerged in the 1950s and 1960s. The behavioral science school was a natural progression of the human relations movement. It focused on applying conceptual and analytical tools to the problem of understanding and predicting behavior in the workplace. However, the study of behavioral science and organizational behavior was also a result of criticism of the human relations approach as simplistic and manipulative in its assumptions about the relationship between worker attitudes and productivity. The study of behavioral science in business schools was given increased credence by the 1959 Gordon and Howell report on higher education, which emphasized the importance to management practitioners of understanding human behavior. The behavioral science school has contributed to the study of management through its focus on personality, attitudes, values, motivation, group behavior, leadership, communication, and conflict, among other issues. Some of the major contributors to this school include Douglas McGregor, Chris Argyris, Frederick Herzberg, Renais Likert, and Ralph Stogdill, although there are many others. 28
  29. 29. ABRAHAM MASLOW – Father of Humanistic of Motivation/ Psychology – Theory Hierarchy safety, of social needs: esteem, physiological, and self actualization – Each step of the hierarchy must be satisfied before the next can be activated, and that once a need was substantially satisfied, it no longer motivated behavior. Self actualization, achieving one’s full potential, summit of a human being’s existence 29
  30. 30. DOUGLAS McGREGOR THE MODERN MANAGEMENT SCHOOL Modern management thought has evolved from older theories of management and years of management experience. Additionally, supporting and conflicting theories have been offered over the years leading to more confusion. Thus, from the "Management Theory Jungle" (Koontz), has emerged the thought of modern management. DECISION THEORY The decision theory school of management, led by Simon looks upon the management processes as a decision making process. In view of the decision theories, since the performance of various management 30
  31. 31. functions involved decision making the entire field of management can be studied from the study of the process of decision making. They have expanded their area of theory building from the decision making processes to the study of the decision, the decision maker and the social and psychological environment of the decision maker. The decision theory starts with the small areas of decision making and then looks at the entire field of management through this keyhole. Decision theory approach The decision theory school focused on the managerial decision making which, in its view, is the core management task, pervading all management functions. Herbert A. Simon, the chief exponent of this school, uses managing and decision making as synonymous. Decision theory approach has the following features. 1. Management is essentially decision making. 2. The members of the organizations are decision makers and problem solved. 3. Organization can be treated as a combination of various decision centers. The level and importance of the organizational members are determined on the basis of importance of decision which they make. 4. Quality of decision affects the organizational effectiveness. 31
  32. 32. 5. All factors affecting the decision making are the subject matter of the study. Uses and limitations: the approach contributes a lot of towards the sharpening of the managerial tools especially for making suitable decisions in the organization. The school as how the managers can discharge their functions effectively. But it does not take the total view of the management. As such, its scope is quite limited considering the requirements of the management. MANAGEMENT SCIENCE AND MIS Management science (also called operations research) uses mathematical and statistical approaches to solve management problems. It developed during World War II as strategists tried to apply scientific knowledge and methods to the complex problems of war. Industry began to apply management science after the war. George Dantzig developed linear programming, an algebraic method to determine the optimal allocation of scarce resources. Other tools used in industry include inventory control theory, goal programming, queuing models, and simulation. The advent of the computer made many management science tools and concepts more practical for industry. Increasingly, management science and management information systems (MIS) are intertwined. MIS focuses on providing needed information to managers in a useful format and at the proper time. Decision support systems (DSS) attempt to integrate decision models, 32
  33. 33. data, and the decision maker into a system that supports better management decisions. Management science theory is an approach to management that focuses on the use of rigorous quantitative techniques to help managers make maximum use of organizational resources to produce goods and services. In essence, management science theory is an extension of scientific management, which, as developed by Taylor, also took a quantitative approach to measuring the worker-task mix to raise efficiency. There are many branches of management science, and once again, IT, which is having a significant impact on all kinds of management practices, is affecting the tools managers use to make decisions. Each branch of management science deals with a specific set of concerns: • Quantitative management utilizes mathematical techniques—such as linear and nonlinear programming, modeling, simulation, queuing theory, and chaos theory—to help managers decide, for example, how much inventory to hold at different times of the year, where to locate a new factory, and how best to invest an organization’s financial capital. IT offers managers new and improved ways of handling information so that they can make more accurate assessments of the situation and better decisions. 33
  34. 34. • Operations management provides managers with a set of techniques that they can use to analyze any aspect of an organization’s production system to increase efficiency. IT, through the Internet and through growing B2B networks, is transforming the way managers handle the acquisition of inputs and the disposal of finished products. • Total quality management (TQM) focuses on analyzing an organization’s input, conversion, and output activities to increase product quality.40 Once again, through sophisticated software packages and computer-controlled production, IT is changing the way managers and employees think about the work process and ways of improving it. Total quality management (TQM) is a philosophy or approach to management that focuses on managing the entire organization to deliver quality goods and services to customers. This approach to management was implemented in Japan after World War II and was a major factor in their economic renaissance. TQM has at least four major elements. Employee involvement is essential in preventing quality problems before they occur. A customer focus means that the organization must attempt to determine customer needs and wants and deliver products and services that address them. Benchmarking means that the organization is always seeking out other organizations that perform a function or process more effectively and using them as a standard, or benchmark, to judge their own 34
  35. 35. performance. The organization will also attempt to adapt or improve the processes used by other companies. Finally, a philosophy of continuous improvement means that the organization is committed to incremental changes and improvements over time in all areas of the organization. TQM has been implemented by many companies worldwide and appears to have fostered performance improvements in many organizations. Perhaps the best-known proponent of this school of management was W. Edwards Deming. • Management information systems (MISs) help managers design systems that provide information about events occurring inside the organization as well as in its external environment—information that is vital for effective decision making. Once again, IT gives managers access to more and better information and allows more managers at all levels to participate in the decisionmaking process. All these subfields of management science, enhanced by sophisticated IT, provide tools and techniques that managers can use to help improve the quality of their decision making and increase efficiency and effectiveness. PRODUCTION AND OPERATIONS MANAGEMENT This school focuses on the operation and control of the production process that transforms resources into finished goods and services. It 35
  36. 36. has its roots in scientific management but became an identifiable area of management study after World War II. It uses many of the tools of management science. Operations management emphasizes productivity and quality of both manufacturing and service organizations. W. Edwards Deming exerted a tremendous influence in shaping modern ideas about improving productivity and quality. Major areas of study within operations management include capacity planning, facilities location, facilities layout, materials requirement planning, scheduling, purchasing and inventory control, quality control, computer integrated manufacturing, just-in-time inventory systems, and flexible manufacturing systems. SYSTEMS SCHOOL The systems approach to management is more a perspective for viewing problems than a school of management thought. Ludwig von Bertalanffy is recognized as the founder of general system theory. The system approach is based on the concept that an organization is a system. A system is defined as a number of interdependent parts functioning as a whole for some purpose. Here 36
  37. 37. there are five components: inputs, a transformation process, outputs, feedback, and the environment. The systems approach is very important in general management analysis. Four especially ideas that have had substantial impact on management thinking are the concepts of open versus closed systems, subsystems, subsystems and interdependencies, synergy and entropy. Open versus closed systems. According to Ludwig von Bertlanffy, there are two basic types of systems: closed systems and open systems. Closed system are not influenced by and do not interact with their environments. Open systems interact with their environment. All organizations are open systems, although the degree of interaction may vary. Entropy. Entropy is a universal property of systems and refers to their tendency to run down and die. A primary objective of management, form systems perspective, is to avoid entropy. Synergy. Synergy means that the whole is greater the sum of its parts. Synergy is an important concept for managers in that it reinforces the need to work together in a cooperative fashion. Subsystems. A subsystem is a system within a system. From another perspective, subsystems are parts of a system that depend on one another. 37
  38. 38. The concept “wholeness” is very important in general system analysis. L. Thomas Hopkins suggested the following six guidelines regarding system “wholeness” that should be remembered during systems analysis: The whole should be the main focus of analysis, with the parts receiving secondary attention. Integration is the key variable in wholeness analysis. Possible modifications in each part should be weighted in relation to possible effects on every other part. Each part has some role to perform so that the whole can accomplish its purpose. The nature of the parts and its function is determined by its position in the whole. All analysis starts with the existence of the whole. Systems theory offers the manager a useful perspective. For example, the management system is based upon general system theory.  Based on the concept that an organization is a system.  To management is more a perspective for viewing problems than a school of management thought.  Views organization as a system composed of interconnectedand thus mutually dependent-sub-systems.  Sub-systems can have their own sub-sub-systems.  A system can be perceived as composed of some components, functions and processes (Albrecht, 1983) 38
  39. 39. Three (3) Basic Elements of Systems Approach (Bakke, 1953)  Components (5 basic, interdependent parts) 1. the individual 2. the formal and informal organization 3. patterns of behavior emerging from role demands of the organization, 4. role comprehension of the individual 5. the physical environment in which individuals works.  Linking processes: 1. Communication: means for eliciting action, exerting control and effecting coordination to link decision centers in the system in a composite 2. Balance: the equilibrium between different parts of the system so that they keep a harmoniously structured relationship with one another. 3. Decision analysis: considered to be a linking process 39
  40. 40.  Goals of Organization: 1. Growth: expansion or development 2. Stability: solidity or strength 3. Interaction: implies how best the members can interact with one another to their mutual advantage. Characteristics of Systems  Systems have structure, defined by components/elements and their composition;  Systems have behavior, which involves inputs, processing and outputs of material, energy, information, or data;  Systems have interconnectivity: the various parts of a system have functional as well as structural relationships to each other.  Systems may have some functions or groups of functions input process output input process output • or raw sanding wood sanded painting wood painted assembling wood assembled table selling sold table • dining 40
  41. 41. The Systematic School of Management Thought views organizations as made up of 'input-processoutput' building blocks embraces techniques that integrate both scientific management and sociological/psychological techniques. ('Human nature' must be included.) The systems school focuses on understanding the organization as an open system that transforms inputs into outputs. This school is based on the work of a biologist, Ludwig von Bertalanffy, who believed that a general systems model could be used to unite science. Early contributors to this school included Kenneth Boulding, Richard Johnson, Fremont Kast, and James Rosenzweig. Kenneth Boulding - He was cofounder of General Systems Theory and founder of numerous ongoing intellectual projects in economics and social science. 41
  42. 42. The systems school began to have a strong impact on management thought in the 1960s as a way of thinking about managing techniques that would allow managers to relate different specialties and parts of the company to one another, as well as to external environmental factors. The systems school focuses on the organization as a whole, its interaction with the environment, and its need to achieve equilibrium. General systems theory received a great deal of attention in the 1960s, but its influence on management thought has diminished somewhat. It has been criticized as too abstract and too complex. However, many of the ideas inherent in the systems school formed the basis for the contingency school of management. CONTINGENCY SCHOOL The contingency school focuses on applying management principles and processes as dictated by the unique characteristics of each situation. It emphasizes that there is no one best way to manage and that it depends on various situational factors, such as the external environment, technology, organizational characteristics, characteristics of the manager, and characteristics of the subordinates. Contingency theorists often implicitly or explicitly criticize the classical school for its emphasis on the universality of management principles; however, most classical writers recognized the need to consider aspects of the situation when applying management principles. 42
  43. 43.  Suggests that different environments require different organizational relationships for optimum effectiveness, taking consideration various social, economic factors. legal, political, technical and ( Hellriegel and Slocum, 1973) The contingency school originated in the 1960s. It has been applied primarily to management issues such as organizational design, job design, motivation, and leadership style. For example, optimal organizational structure has been theorized to depend upon organizational size, technology, and environmental uncertainty; optimal leadership style, meanwhile, has been theorized to depend upon a variety of factors, including task structure, position power, characteristics of the work group, characteristics of individual subordinates, quality requirements, and problem structure, to name a few. A few of the major contributors to this school of management thought include Joan Woodward, Paul Lawrence, Jay Lorsch, and Fred Fiedler, among many others. Four important ideas of Contingency Theory • There is no universal or one best way to manage. • The design of an organization and its subsystems must 'fit' with the environment. • Effective organizations not only have a proper 'fit' with the environment but also between its subsystems 43
  44. 44. • The needs of an organization are better satisfied when it is properly designed and the management style is appropriate both to the tasks undertaken and the nature of the work group. the development of contingency theory in the 1960s by Tom Burns and G. M. Stalker in Britain and Paul Lawrence and Jay Lorsch in the United States. Tom Burns Through their analysis they co-related the structure of an organization to the surrounding environmental conditions. In the Fifties of the last century Burns and Stalker (both from UK) analysed the environments and structures of several British and Scottish firms. In their pioneering work "Management of innovation" (1968) 44
  45. 45. The crucial message of contingency theory is that there is no one best way to organize: The organizational structures and the control systems that managers choose depend on—are contingent on—characteristics of the external environment in which the organization operates. According to contingency theory, the characteristics of the environment affect an organization’s ability to obtain resources; and to maximize the likelihood of gaining access to resources, managers must allow an organization’s departments to organize and control their activities in ways most likely to allow them to obtain resources, given the constraints of the particular environment they face. In other words, how managers design the organizational hierarchy, choose a control system, and lead and motivate their employees is contingent on the characteristics of the organizational environment (see Figure 2.5). An important characteristic of the external environment that affects an organization’s ability to obtain resources is the degree to which the environment is changing. Changes in the organizational environment include changes in technology, which can lead to the creation of new products (such as compact discs) and result in the obsolescence of existing products (eight-track tapes); the entry of new competitors (such as foreign organizations that compete for available resources); and unstable economic conditions. In general, the more quickly the organizational environment is changing, the greater are the problems associated with gaining access to resources and the greater is managers’ need to find ways to coordinate the activities of people in 45
  46. 46. different departments to respond to the environment quickly and effectively. The contingency school of management can be summarized as an ―it all depends‖ approach. The appropriate management actions and approaches depend on the situation. Managers with a contingency view use a flexible approach, draw on a variety of theories and experiences, and evaluate many options as they solve problems. Contingency management recognizes that there is no one best way to manage. In the contingency perspective, managers are faced with the task of determining which managerial approach is likely to be most effective in a given situation. For example, the approach used to manage a group of teenagers working in a fast-food restaurant would be very different from the approach used to manage a medical research team trying to find a cure for a disease. Contingency thinking avoids the classical ―one best way‖ arguments and recognizes the need to understand situational differences and respond appropriately to them. It does not apply certain management principles to any situation. Contingency theory is a recognition of the extreme importance of individual manager performance in any given situation. The contingency approach is highly dependent on the experience and judgment of the manager in a given organizational environment. 46
  47. 47. Bibliography Santos, Emmanuel T., Organization and Management. Revised Edition; Manila: IAME Design Studio, 2009 Newstrom, John W.. Organizational Behavior. 12th Edition; New York, USA: McGraw-Hill, 2007 Classical Schools of Management. 5 Feb 2013 <,articleId8851.html>. Barnat, Ryszard, LLM., DBA, Ph.D. (August 22, 1996) (Strat. Mgmt) Poland; The Management Science School Sridhar, M.S. Ph.D., (February 18, 2009) Schools of Management Thought, Managerial Quality and Leadership Styles; email:,, tcjonzin ; February 8, 2012 47