Mtp unit 2

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M.B.A. first semester MTP NOTE

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Mtp unit 2

  1. 1. Evolution of Management Thought
  2. 2. 2 Evolution of Management Thought Effective management played a key role in the construction of the pyramids, the use of communication and control of the Roman Empire, and the legal framework of commerce in 14th century VENICE.
  3. 3. 3 Evolution of Management Thought  The most significant historical point of reference in the evolution of management was the advent of the Industrial Revolution.  By the turn of the 20th century the science and practices of management were on a rapid and continuing path of development.
  4. 4. Evolution of management thought can be classified into two different stages: TRADITIONAL APPROACH  Scientific Management Approach  Administrative Management Approach  Human Relations Approach  Bureaucratic Approach MODERN APPROACH  Behavioural Approach  Quantitative Approach  Systems Approach  Contingency Approach
  5. 5. Traditional Viewpoint Behavioral Viewpoint Systems Viewpoint Contingency Viewpoint Quantitative Viewpoint 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
  6. 6. TRADITIONAL APPROACH Scientific Management Approach Bureaucratic Approach Human Relations Approach Administrative Management Approach
  7. 7. Scientific Management  Frederick W. Taylor  The father of Scientific Management – the 1st Efficiency Expert.  Joined MIDVALE STEEL as a machinist in 1878 , earned degree of Engineering through evening study and rose to the position of chief engineer.  His experience as an apprentice, a common laborer, a foreman, a master mechanic, and then the chief engineer of the steel company gave Taylor ample opportunity to know first-hand problems and attitudes of workers and to see the greatest possibilities for improving quality of management.  A philosophy and set of management practices that are based on fact and observation, not on guesswork
  8. 8. • He was interested in machines -- apprenticeship in industry: Midvale Steel • Shocked by how inefficient his fellow workers were • timed workers with stopwatches • break down job into parts, make parts efficient • figure out how to hire the right worker for the job • give the worker appropriate training Taylor’s Work?
  9. 9. • introduced incentive pay plans (workers were assumed to be motivated only by money). • Believed would lead to cooperation-- management and worker • Studied design of shovels and introduced a better design at Bethlehem Steel Works, reducing the number of people shoveling from 500 to 140 •Taylor’s famous work Principles of scientific Scientific management was published in 1911. Taylor’s Work? Contd.
  10. 10.  Taylor first published his theory on management in a paper entitled, “A PIECE RATE SYSTEM” and presented to the American Society of Mechanical Engineers in 1985. Further he developed it and published “SHOP MANAGEMENT” in 1903.
  11. 11. The fundamental principles underlying Scientific Management approach are:  Replacing rule of thumb with science.  Obtaining harmony rather than discord in group action.  Achieving cooperation of human being, rather than chaotic individualism.  Working for maximum output rather than restricted output.  Developing all workers to the fullest extent possible for their own and company highest prosperity.
  12. 12. Other Scientific Management Pioneers  The Gilbreths  Frank Gilbreth used motion pictures to analyze workers’ motions  Lillian Gilbreth championed protecting workers from unsafe working conditions  Henry Gantt  Focused on control systems for production scheduling (Gantt Chart)
  13. 13. Frank and Lillian Gilbreth  Frank Gilbreth developed motion study as a primary tool for managers. He maintained that there was one best way to perform a given job. Gilbreth proved the truth of his idea by simplifying the motions used in bricklaying industry.  Lilian Gilbreth is an industrial psychologist, focused on the human aspect of work and the understanding of workers personalities and needs.
  14. 14. Henry L. Gantt  H L Gantt worked with Taylor and made significant contribution to the study of scientific management.  Called for scientific selection of workers and harmonious cooperation between labor and management. Stressed need for training.  His famous Gantt Chart has become very popular and it was forerunner of modern techniques like CPM & PERT.  Scheduling Innovation Gantt Chart – scheduling summary of work  Rewarding Innovation Bonus in addition to the piece rate if they exceeded their daily production quota On time = Bonus, Good Performance = Reward
  15. 15. Problems associated with Scientific Management  Managers often gave attention only to increasing output.  They did not allow workers to share in the benefits of increased output.  Specialized jobs became very boring & dull.  Workers ended up distrusting Scientific Management.
  16. 16. Insights from Scientific Management Many companies have used scientific management principles to improve efficiency, employee selection and training Scientific management failed to recognize the social needs of workers and the importance of working conditions and job satisfaction
  17. 17. David Berbauer CEO, Walgreens “Walgreens is constantly pushing to drive costs down. It pioneered the application of satellite communications and computer technology and linked these to increase store efficiency. By using tried-and-proven management concepts, each of its 6,100 stores [is] able to process around 280 prescriptions a day and beat Wal-Mart by 27 cents and CVS by 94 cents on each prescription.” Snapshot
  18. 18. Bureaucratic Management  Max Weber
  19. 19. Bureaucratic Management  Use of rules, hierarchy, a clear division of labor, and detailed procedures to guide employees’ behaviors  Seven characteristics  Rules—formal guidelines for the behavior of employees on the job  Impersonality—employees are evaluated according to rules and objective data  Division of Labor—splitting work into specialized positions
  20. 20. Caliper Technologies Corporation (adapted from Figure 2.2) CEO Director of Quality Control Chief Financial Officer VP of Operations VP of Sales & Marketing VP of Research VP of Product Development VP of Corporate Development Plant Manager USA Controller Plant Manager Germany Manager of Chemical Engineering Manager of Chip Manufacturing Manager of Engineering & Software Director of Manufacturing Director of Manufacturing Employees Employees
  21. 21.  Hierarchical Structure—ranks jobs according to the amount of authority in each job  Authority—who has the right to make decisions of varying importance at different organizational levels  Traditional authority Charismatic authority Rational, legal authority  Lifelong Career Commitment—both the employee and the organization view themselves committed to each other over the working life of the employee  Rationality—the use of the most efficient means available to accomplish a goal
  22. 22. “Each job has a policy manual detailing the rules that a person needs to follow to ensure efficiency. Drivers are told to walk to a customer’s door at a brisk pace of 3 feet per second, carrying the package in the right hand and clipboard in the left. They should knock on the door so as not to lose valuable seconds searching for a doorbell.” Michael Eskew Chairman and CEO, UPS Snapshot
  23. 23. LOW MIDRANGE HIGH DreamWorks Sony IRS R&D Thinktank 7-11 McDonalds MP3 PepsiCo State Motor Vehicle Registration Bureaucratic Continuum
  24. 24. Potential Benefits of Bureaucracy  Efficiency  Consistency  Functions best when routine tasks are performed  Performance based on objective criteria  Most effective when  Large amounts of standard information have to be processed  The needs of the customer are known and are unlikely to change  The technology is routine and stable (e.g., mass production)  The organization has to coordinate the activities of employees in order to deliver a standardized service/product to the customer
  25. 25. Potential Costs of Bureaucracy Rigid rules and red tape Protection of authority Slow decision making Incompatible with changing technology Incompatible with 21st century workers’ values for freedom and participative management
  26. 26. Administrative Management: Overview  Focuses on the manager and basic managerial functions of planning, organizing, controlling and leading  Unity of Command Principle: an employee should report to only one manager  Authority Principle: managers have the right to give orders to get things done
  27. 27. Fayol’s Principles of Effective Management  Division of Work: allows for job specialization.  Work should be divided among individuals and groups.  Authority and Responsibility  Authority right to give orders  Responsibility involves being answerable Whoever assumes authority assumes responsibility  Discipline  Common efforts of workers. Penalties  Unity of Command  Employees should have only one boss.
  28. 28.  Unity of Direction  A single plan of action to guide the organization.  Subordination of individual interests to the general interests of organization  Remuneration  An equitable uniform payment system that motivates contributes to organizational success.  Centralization  The degree to which authority rests at the top of the organization.  Scalar Chain  Chainlike authority scale.  Most vs. least authority
  29. 29.  Order  The arrangement of employees where they will be of the most value to the organization and to provide career opportunities.  Equity  The provision of justice and the fair and impartial treatment of all employees.  Stability of Tenure of Personnel  Long-term employment is important for the development of skills that improve the organization’s performance. Subordination of Individual Interest to the Common Interest  The interest of the organization takes precedence over that of the individual employee.
  30. 30.  Initiative  The fostering of creativity and innovation by encouraging employees to act on their own.  Esprit de corps  Harmony, general good feeling among employees, shared enthusiasm, foster devotion to the common cause (organization).
  31. 31. Behavioral Viewpoint: Overview  Focuses on dealing effectively with the human aspects of organizations  Started in the 1930’s  Emphasis on working conditions  Workers wanted respect  Workers formed unions to bargain with management
  32. 32. Mary Parker Follett’s Contributions  Managers need to establish good working relationships with employees Goal: Improve Coordination
  33. 33. “Managers need to have a common touch and to be a team leader and not a drill sergeant. When their people shine, they shine.” Vickie Yoke, Senior Vice President, Alcatel Snapshot
  34. 34. Chester Barnard’s Contributions  People should continuously communicate and cooperate with one another  Acceptance theory of authority holds that employees have free wills and, thus, choose whether to follow management’s orders. Employees will follow orders if they:  Understand what is required  Believe the orders are consistent with organization goals  See positive benefits to themselves in carrying out the orders
  35. 35. The Hawthorne Studies  Studies of how characteristics of the work setting affected worker fatigue and performance at the Hawthorne Works of the Western Electric Company from 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, worker productivity increased.
  36. 36. The Hawthorne Studies The Relay Assembly Test Room Experiments Working conditions and productivity The Bank Wiring Observation Room Experiment Analyze the social relationships in a work group The Hawthorne Studies
  37. 37. Employees are motivated by social needs and association with others Employees’ performance is more a result of peer pressure than management’s incentives and rules Managers need to involve subordinates in coordinating their work to improve efficiency Employees want to participate in decisions that affect them Lessons from the Hawthrone Studies Behavioral Viewpoint
  38. 38. Snapshot “Teamwork is one of the most beautiful experiences in life. Teamwork is our core value and a primary way that the Container Store enriches the quality of employees’ work life.” Kip Tindell, President, The Container Store
  39. 39.  System: an association of interrelated and interdependent parts  Systems viewpoint: an approach to solving problems by diagnosing them within a framework of transformation processes, outputs, and feedback Systems Viewpoint: Systems Concepts
  40. 40. Inputs Human, physical, financial, and information resources Transformation Process Outputs Products and services Feedback Loops Basic Systems View of Organizations
  41. 41.  Closed system: limits its interactions with the environment (e.g., stamping department in GM assembly plant)  Open system: interacts with the external environment (e.g., marketing department) System Types
  42. 42. Mathematical models are used to simulate changes Computers are essential Primary focus is on decision making Alternatives are based on economic criteria Quantitative Techniques
  43. 43. Lead to creation of blogs Enables managers to simulate conditions Emphasis on objective criteria for decision making Focus on planning
  44. 44. The Contingency Approach What managers do in practice depends on a given set of circumstances – a situation.
  45. 45.  Management practices should be consistent with the requirements of the external environment, the technology used to make a product or provide a service, and capabilities of the people who work for the organization  Uses concepts of the traditional, behavioral and system viewpoints
  46. 46.  External environment—stable or changing  Technology—simple or complex  People—ways they are similar and different from each other Contingency Variables
  47. 47. Behavioral Viewpoint How managers influence others;  Informal group  Cooperation among employees  Employee’s social needs Systems Viewpoint How the parts fit together.  Inputs  Transformations  Outputs Traditional Viewpoint What managers do:  Plan  Organize  Lead  Control Contingency Viewpoint Managers’ use of other viewpoints to solve problems involving:  External environment  Technology  Individuals Contingency Viewpoint: Draws on Other Viewpoints, As Necessary
  48. 48.  Quality: how well a product or service does what it is supposed to do—how closely and reliably it satisfies the specifications to which it is built or provided  Total Quality Management (TQM): a philosophy that makes quality values the driving force behind leadership, design, planning, and improvement initiatives
  49. 49.  Inputs or raw materials  Operations  Outputs  Measuring by variable or a product’s characteristics  Measuring by attribute or a product’s acceptable/ unacceptable characteristics  Statistical process control  Quality of a process (e.g., sigma) Quality Control Process
  50. 50. Lower Costs and Higher Market Share Decreased Product Liability Quality Positive Company Image Learning from the Quality Viewpoint

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