The Concept of Modern Management (Chapter1)

Chapter1 highlights

The concept of modern management, F. W. Taylor, scientific management, Administrative and functional management,(classical theory), Max Weber and bureaucracy, Chester Bernard, Neo classical theory, Contingency theory

The concept of modern management

Setting any goal and achieving it are two sequential and common functions of every individual. For some these activities are very smooth and for some very difficult.  Knowledge and skills of management make these easy and absence of managerial skill and knowledge make difficult. Managerial knowledge and skill help to set goals and achieve them in the efficient manner. By efficient we mean in lower cost, lesser time, and with lesser effort, we make goals and achieve them.

So in modern management there lie three basic activities: planning, implementing and controlling.  Planning means the functions of deciding goals and fixing the achieving procedures of goals in advance. Implementing means doing what were decided. Thus implementing activities include arranging men, materials, money; leading and instructing men about doing works. Controlling refers to the process of evaluating the works of the people and group whether they are going according to progress or not and taking actions as per the needs.

Figure 1: Gives information about management process and each process is subdivided in the Table 1.

History of management thought

If management is thought as use of resources for the achievement of goals then the history of management should be linked with the every efforts that human being made from the history of human civilizations. However, for the understanding of development of management we trace its development from the written records available on the earth.

Researches made so far indicated that present state of management has its foundation on different management thoughts began from 6th century B.C., when Sun Tzu wrote ‘The Art of War. Sun Tzu stated “The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.”[i]  It was management strategy.

Another evidence can be taken  to Nicolò Machiavelli (1469-1527), who is called father of modern political philosophy, argues that a ruler should not care about these norms (or laws in general) and should only be concerned with authority and power, which are equal, and war. According to Machiavelli a prince should therefore have no other aim or thought, nor take up any other thing for his study but war and it organization and discipline, for that is the only art that is necessary to one who commands.[ii]

Third evidence of management in writing can be found in the writings of Adam Smith. Adam Smith (1723-1790) born in ‘Scotland’ is often described as the “founding father of economics”. A great deal of what is now considered standard theory about the theory about markets was developed by Adam Smith. Two books, Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations are of great importance.[iii]

Adam Smith, in The Wealth of Nations (1776), made an argument on the economic advantages that organizations and society would achieve from the division of labor, which is the breakdown of jobs into narrow, repetitive tasks. Smith concluded that division of labor increased productivity by increasing each worker’s skill and dexterity, by saving time that is usually lost in changing tasks, and by the creation of labor- saving inventions and machinery.

Probably, the most important influence on management was the Industrial Revolution. It began in the late eighteenth century in Great Britain, where machine power was being substituted for human power.

John D. Rockefeller was putting together the Standard Oil monopoly, Andrew Carnegie was gaining control of two- thirds of the steel industry, and other people were creating new businesses that would require formalized management practices.

Emerging challenges for management

1. Globalization: Managers need to think globally and act locally.
2. Technology: The new economy will base on digital revolution. The development in information technology will provide greater access to management. Management will need to manage changing technology effectively.
3. Quality: Quality assurance is getting important.
4. Social responsibility: Management will pursue long-term goals that are good for society.
5. Empowerment: To empower worker is a challenge to management.
6. Human resource management: Management needs to deal with diversified work force, requires visionary leadership on the part of management.
7. Organization design: Organization will be lean flat and less hierarchical
8. Cultural sensitivity: Cultural value will change cross-cultural influences. Organizations are emerging as cultural systems.
9. Change management: Manager will face the challenge of managing change. They will need to aware specific changes and their likely impact on the practice of management.
10. Learning organization: Management needs to create learning environment. Organization of future will be predominantly knowledge based.

Classical contributions

The roots of modern management lie within a group of practitioners and writers who gave their contributions to management, which we call the classical approach. We can divide it into three subcategories: scientific management theorists, general administrative theorists and bureaucratic theorists.

1. W. Taylor, scientific management

Fredrick Winslow Taylor (F.W Taylor), American engineer, was born in USA in 1856. He joined Midvale steel company where he worked as a machine shop worker for two years as gang boss for some years and as chief engineer at the age of 28.he also joined Bethlehem steel company, where he served for a long time. Later he devoted his time to develop the concept of scientific management.

When rule of thumb (no single prescribed rule to manage) is replaced by a logical, scientific knowledge based principles to manage then it is called scientific management. It is the F. W. Taylor, who propounded scientific management principles, which became successful in increasing productivity in the factories. Management become of the subject of learning by formal and informal way by anybody who wish to manage the enterprises.  At that time, this thought gave certain formulae to run the factories efficiently.

The formulae were:

1. Finding the best methods of doing works in the factory. Tailor assigned this job to management.
2. Selecting employee based on the merit and ability related the nature of work.
3. Training the worker about the best methods
4. Providing working conditions and rewards to motivate them.

This formula worked everywhere. From 1910 to 20, this theory had peak period of use.

Administrative and functional management

Each organization should follow certain principles if it has to run smoothly and progress well. Henri Fayol developed this principle. Fayol was born in 1841 in a suburb of Istanbul, Ottoman Empire. He was French mining engineer and when he became nineteen-year old then he started at the mining company “Compagnie de Commentry-Fourchambeau-Decazeville” in Commentry. Fayol became managing director in 1888, when the mine company employed over 10,000 people, and held that position over 30 years until 1918. By 1900 the company was one of the largest producers of iron and steel in France and was regarded as a vital industry. Based largely on his own management experience, he developed his concept of administration. In 1916 he published these experience in the book “Administration Industrielle et Générale”, at about the same time as Frederick Winslow Taylor published his Principles of Scientific Management.

He proposed 6 primary functions of management and 14 principles of management.

Functions of management

1. to forecast and plan
2. to organize
3. to command or direct
4. to coordinate
5. to develop output
6. to control (French: controller: in the sense that a manager must receive feedback about a process in order to make necessary adjustments and must analyze the deviations)

Now many writers have reduced this function to five: (1) planning; (2) organizing; (3) leading; (4) controlling (5) Forecasting (Draft, 1983)[iv] .

Principles of management

1. Division of work. Work should be divided among individuals and groups to ensure that effort and attention are focused on special portions of the task. Fayol presented work specialization as the best way to use the human resources of the organization.
2. Authority. Managers must be able to give orders. Authority gives them this right. Note that responsibility arises wherever authority is exercised.
3. Discipline. Employees must obey and respect the rules that govern the organization. Good discipline is the result of effective leadership, a clear understanding between management and workers regarding the organization’s rules, and the judicious use of penalties for infractions of the rules.
4. Unity of command. Every employee should receive orders from only one superior.
5. Unity of direction. Each group of organisational activities that have the same objective should be directed by one manager using one plan.
6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.
8. Centralization. Centralisation refers to the degree to which subordinates are involved in decision making. Whether decision making is centralized (to management) or decentralized (to subordinates) is a question of proper proportion. The task is to find the optimum degree of centralisation for each situation.
9. Scalar chain. The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. However, if following the chain creates delays, cross-communications can be allowed if agreed to by all parties and superiors are kept informed.
10. Order. People and materials should be in the right place at the right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies.
13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity within the organization.

Max Weber and bureaucracy

Max Weber was the German sociologist born in 1864, in Prussia. He prescribed many ideal-typical forms of public administration, government and business in his 1922 work ‘Economy and Society’. A bureaucracy is “a body of non-elective government officials” and/or “an administrative policy-making group.

According to Waver bureaucracy refers to the management of large organizations characterized by hierarchy, fixed rules, impersonal relationships, rigid adherence to procedures, and a highly specialized division of labor.

Weber suggests the characteristics of bureaucracy as following[v] :

1. There is the principle of fixed official jurisdictional areas, which are generally ordered by rules, that is, by laws or administrative regulations.
2. The principles of office hierarchy and of levels of grade authority mean a firmly ordered system of super and subordination in which there is a supervision of the lower offices by the higher ones.
3. The management of modern offices is based upon written documents (“the files”), which are preserved in their original or draught form.
4. Office management, at least all specialized office management – and such management is distinctly modern – usually presupposes thorough and expert training.
5. When the office is fully developed, official activity demands the full working capacity of the official, irrespective of the fact that his obligatory time in the bureau may be firmly delimited.

6- The management of the office follows general rules which are more or less stable, more or less exhaustive, and which can be learned.

Chester Bernard

He was born in 1886.  He worked as Chief Executive Officer of New Jersey Bell Telephone.
He is authoring ‘Functions of the Executive’, an influential 20^th century management book, in which Barnard presented a theory of organization and the functions of executives in organizations. He has developed 2 concepts in Management Theory.

First concept is strategic planning:  it is the formulation of major plan or strategies to pursuit of major objectives. And he prescribed three top functions of management. They are: (i) establish and maintain an effective communication system, (2) hire the experienced and suitable personnel, (3) motivate those personnel.

The second concept is acceptance theory of authority: Managers have more authority than employees. It suggested that authority flows downward but depends on acceptance by the subordinate. It depends on 4 conditions: (1) employees can and do understand the communication (2) employees must be able to follow any instruction given by a Manager,  (3) employees must think that the directive is in keeping with organizational objectives, (4) employees must think that the directive is not contrary to their personal goals.

Chester Bernard argued that organization that do not care efficiency and effectiveness have short life. He further assessed that except churches there are very few organizations that lived more than a century.

Neo classical theory,

Neo classical management theory emerged due to the limitations of classical management theory to understand people aspect of the organizations. There are two theories under this: Human Relation theory and Behavioral Science Theory.

1. Human Relations

Elton Mayo, Harvard University, psychologist is the -Founder of Human Relations. This theory argues that production efficiency in the organization depends upon emotional factors involved in the workers with the managers. This experience was conducted on Hawthorne plant of western electric company. The relations between managers and workers determine the extent happiness in employee and only the happy and satisfied employee will try to give productions.

1. Behavioral Science Approach

Maslow, F.Herzberg & D.McGregor are the main contributors of this theory. They emphasized on psychology, sociology & anthropology as the main contributing discipline of management. The thesis behind this theory is organization is basically a social system and not just techno economical system; Individuals may behave differently under different situations. Attempts should be made to connect organizational goals & human needs. Management must develop social skills in addition to technical skill to handle the people. Man to man relationship, team spirit & group harmony should be given top preference by management.

Contingency theory

Main contributors of these theories are Joan Woodward, Fiedler, Lorsch & Lawrence. This theory has put forward the view that management is situational and main objective of management is to identify the important variables in the situations. The three major parts of overall conceptual frame work for contingency management are: (1) Environment, (2) Management concepts, principles and techniques and (3) the Contingent relationship between the mentioned factors [(1) and (2)].

Some important contingencies for companies are (1) Technology, (2) Suppliers and distributors, (3) Consumer interest groups (4) Customers and competitors (5) Government and (6) Unions

John Woodward: Woodward was a leading academic and commentator in the field of Organization Theory, particularly Contingency Theory. Studied a large number of firms (100) in the South Essex area of England in the 1950s. he found that organizational form varied, and correlated with production technology. He concluded that there was not”one best way” to organize. The nature of the production process would determine which form that would be most suitable. His suggestion of organizations structure is like given below.

To Fiedler, stress is a key determinant of leader effectiveness (Fiedler and Garcia 1987; Fiedler et al. 1994)[vi] Fiedler’s situational contingency theory holds that group effectiveness depends on an appropriate match between a leader’s style (essentially a trait measure) and the demands of the situation. Fiedler considers situational control the extent to which a leader can determine what their group is going to do to be the primary contingency factor in determining the effectiveness of leader behavior.

Gareth Morgan in his book Images of Organization describes the main ideas underlying contingency in a nutshell:

1. Organizations are open systems that need careful management to satisfy and balance internal needs and to adapt to environmental circumstances
2. There is no one best way of organizing. The appropriate form depends on the kind of task or environment one is dealing with.
3. Management must be concerned, above all else, with achieving alignments and good fits
4. Different types or species of organizations are needed in different types of environments

Fred Fiedler‘s contingency model focused on a contingency model of leadership in organizations. This model contains the relationship between leadership style and the favorableness of the situation. Situational favorableness was described by Fiedler in terms of three empirically derived dimensions

1. The leader-member relationship, which is the most important variable in determining the situation’s favorableness
2. The degree of task structure, which is the second most important input into the favorableness of the situation
3. The leader’s position power obtained through formal authority, which is the third most important dimension of the situation

Situations are favorable to the leader if all three of these dimensions are high. That is, if the leader is generally accepted and respected by followers (first dimension), if the task is very structured (second dimension), and if a great deal of authority and power are formally attributed to the leader’s position (third dimension), then the situation is favorable.

William Richard Scott describes contingency theory in the following manner: “The best way to organize depends on the nature of the environment to which the organization must relate”.[1] The work of other researchers including Paul Lawrence, Jay Lorsch, and James D. Thompson complements this statement. They are more interested in the impact of contingency factors on organizational structure. Their structural contingency theory was the dominant paradigm of organizational structural theories for most of the 1970s. A major empirical test was furnished by Johannes M Pennings who examined the interaction between environmental uncertainty, organization structure and various aspects of performance.

Human Relations theory

Explains the modern advancement of Human Relations Management theory which takes into account human factors like the employer-employee relationship. Human relations theory is largely seen to have been born as a result of the Hawthorne experiments which Elton Mayo conducted at the Western Electrical Company.

The important strand in the development of modern management was the increase in attention to the human factors, which has become known as the ‘human relations school of management.’ The core aspect of Human Relations Theory is that, when workers were being observed and included in the research, they felt more important and valued by the company. As a result, their productivity levels went up significantly. This represented a significant departure from many of the classical theories, particularly Fordism, as it went against the notion that management needed to control workers, and remove their autonomy at every step. Instead, it showed that by engaging with workers and considering their requirements and needs, company’s could benefit from increased productivity.

Behavioral theory

The behavioral management theory is often called the human relations movement because it addresses the human dimension of work. Behavioral theorists believed that a better understanding of human behavior at work, such as motivation, conflict, expectations, and group dynamics, improved productivity.
The theorists who contributed to this school viewed employees as individuals, resources, and assets to be developed and worked with — not as machines, as in the past. Several individuals and experiments contributed to this theory.

[i] http://www.suntzupoker.com/

[ii] http://www.egs.edu/library/niccolo-machiavelli/biography/

[iii] http://economics.about.com/od/famouseconomists/a/adamsmith.htm

[iv] Daft, Richard L (1983), Organization theory and design, The West series in management., West Pub. Co., cop, ISBN 978-0-314-69645-8

[v] http://ozgurzan.com/management/management-theories/bureaucracy-max-weber/

[vi] Fiedler, F. E. and Garcia, J. E. (1987) New Approaches to Leadership, Cognitive Resources and Organizational Performance, New York: John Wiley and Sons.