Introduction to management Ch.2 PPT - Copy.ppt

CHAPTER TWO
Management Thought
Early Contributors
The pyramid of Egypt & Babylon, the monument in Axum & the
temple in Lalibela, and the castle of Gondar, the wall of Harar
would not have been possible.
The bible /Exodus 18 /13-26/- Advises includes the following.
(i) "Ordinances and Laws" should be taught to the people.
(ii) "Leaders be selected & assigned to be the rulers. In modern
terms it is the base for delegation of authority (Span of
management)
(iii) "These rulers should administer all routine maters, & should
bring only the important questions."

Roman Catholic Church

It was one of the most effective formal organizations in the
history of western civilization.

It introduces hierarchy of authority and staff concept
Military organizations

Contributed in their own simplistic way to the development of
managerial practices though there was little use of theory in it.

Even so, their techniques of authority-relationships between
individuals and groups, direction, motivation, and communication
underwent considerable improvement over the years.

Despite all these, management was not developed as
expected because
A.Low esteem to business in society (undermined by the
society)
B.The different approaches by economists, political scientists
and others towards business organizations.
C.Treatment of managers as an art and not as a science.
D.The attitudes that successful managers are born not made (it
cannot be transferred to others through training)

1. Robert Own (1771-1858)
 He was a successful textile mill manager in Scotland from 1800-1828. He believed that
workers would be more productive if they were motivated through rewards rather
than punishments.
 He experienced with several motivating techniques. Some of them were:
 He improved working conditions within the factory, i.e., providing meals, bath
facilities,
 Housing & marketing facilities.
 Reducing the workday from 13 hrs to 10 ½ hrs. with no night work for children.
 Refused to hire children under the age of 10.
 Because of his emphasis on the workers, he is regarded as the father of modern
personnel management.

1. Charles Babbage (1792-1871)
 He was a British professor of mathematics, He
advocated profit- sharing plans & bonus systems as
ways to achieve better relations between management
and labor.
 He devised a profit-sharing plan that had two parts,
 a bonus that was awarded for useful suggestions and
 a portion of wages that was dependent on factory
profits.

 Adam Smith: Smith made an important contribution to the
development of management thought regarding the impact of division
of labor on manufacturing in his book ‘The Wealth of Nations’ in
1976.
 His conclusion was specialization could lead to increased efficiency.
This is because:
 Specialization increases the dexterity in every particular work person.
 Specialization saves the time lost in passing from one species of work
to another.
 Specialization helps to the invention of great number of machines,
which facilitates and bridge and enable one person to do the work of
many.

Administrative Management
Scientific management theory was aiming at improving the efficiency and
productivity of workers
Whereas scientific management focused on the productivity of the
individual worker, the administrative theory focused on the total
organization. Among the well-known contributors to this theory were
Lyndall Urwick, Chester Barnard, Alvin Brown, Henry Dennison, Oliver
Sheldon and Max Weber.

However, the most notable of all contributors was Henry Fayol.
His book, General and Industrial Management, had a major impact on
the emerging field of management.

• General and Industrial Management,
 Henri Fayol is the one who identified:
A.The major types of activities involved in an industry or a business as
i. Technical - producing and managing products
ii. Commercial - buying raw materials and selling products
iii.Security: protecting employees and property
iv.Financial – search for and optimum use of capital
v. Accounting - recording and taking stock of costs, profits, and liabilities,
keeping balance sheets, profit and loss statements, etc
vi.Managerial – planning, organizing, commanding, coordinating and
controlling

 Elements of Management
 Henry Fayol made a difference between principles of management and elements
of management.
Qualities of a Manager
 Henry Fayol identified the following qualities of managers should possess.
1. Physical (state of health)-good manager should be in good state of health
2. Mental-ability to understand, appreciate, learn, judge and decide
3. Moral (energy, firmness, willingness to accept responsibility, true to his words,
loyalty, and dignity)
4. General Education (general acquaintance with matters not belonging
exclusively to the function performed)
5. Special knowledge (peculiar to the function, be it technical, commercial,
financial, managerial etc.

Henri FAYOL (1841-1925)
Henri Fayol is consideredas the real Father of Modern Management Theory.
Henri Fayol published a book – ‘General and Industrial
Administration (1915)’.
He was a mining engineer in coal mining company in France & then became a
manager.
Henry Fayol identified five management functions and 14 management
principles
Planning: Defining the organizational purpose and ways to achieve it
Organizing : Arranging and structuring work to accomplish organizational
goals
Leading : Directing the work activities of others
Controlling : Monitoring, comparing, and correcting work performance

Contribution of Henri Fayol’s 14 Principles of Management
1. Division of labor. Specialization of labor results in increased productivity. Both
managerial and technical work are reactive to specialization. Work should be divided
among individuals and groups.
2. Authority. Authority was defined by Fayol as the "right to give orders and the
power to command". It is needed to carry out managerial responsibilities.
3. Discipline. Employees must respect the rules that govern the organization.
4. Unity of command. Employees should receive orders from only one superior.
5. Unity of direction. Each group of activities in an organization should be grouped
together under one head and one plan.
6. Subordination of individual interests to the general interest: The interests of
one person should not be placed before the interests of the organization as a whole.
7. Remuneration. Compensation should be based on systematic attempt to reward
good performance.

8. Centralization. The degree to which authority rests at the top of the
organization but need to give subordinates enough authority to do jobs properly.
9. Scalar chain. A chain of authority should extend from the top to the bottom
of the organization. This chain implements the unity-of-command principle and
allows the orderly flow of information.
10. Order. Human and material resources must be in the right place at the right
time.
11. Equity. Employees should be treated as equally as possible.
12. Stability of personnel. Successful firms usually had a stable group of
employees.
13. Initiative. Employees should have the freedom to take initiative.
14. Esprit de corps. Managers should encourage a sense of unity of effort
through harmony of interests

Owen was called industrialist and reformer.

Specialization increases the dexterity

• The emergence of industrial revolution gave challenges in management
which took two forms:
1. how to increase productivity (output/input) by making the work easier to
perform
2. how to motivate workers to take advantage of new methods and
techniques.
• The individuals who developed approaches for meeting these challenges
helped lay the foundation for what is known as scientific management.
• Scientific management grew up from the research of 5 pioneers. They are

A) Frederick W. Taylor (1856-1915) is known as "the father of
scientific management.“
 At the beginning of 20th century business was expanding,
resources were readily available but labor was in short supply.
 The primary goal of management during that time was to use
the existing labor force efficiently, but there was no skilled
manpower.
 It is at this time that Taylor saw how to use the available
resource efficiently.

 The following were some of the problems of the
factory system production as he called them:
i. Management had no clear concept of worker -
management responsibility.
ii. Virtually no effective work standards were applied
iii. No incentive was used to improve labor’s performance
iv. Managerial decisions were made based on intuition,
rule of thumb methods or past experience.

• He was angry or he was impressed with the degree of “soldiering”
- systematic, deliberate delay in performance
• Due primarily to:
(1) the workers’ fear that they might work themselves out of a job if
they produce more,
(2) faulty wage systems set up by management encouraged workers
to operate at a slow pace.
For example, pay by the hour or the day mainly encouraged
attendance rather than output.

On the other hand, companies that cut incentive pay when
workers began to exceed standards also made workers reluctant
to excel
(3) rule of thumb method permitted by managers.
These factors led Taylor to conclude that managers, not
workers, were responsible for the soldiering .
• The interest target of Taylor was to utilize human and
material resources efficiently and effectively. The following
are some of the studies he conducted.

1. Time and motion study- the “Science of eliminating
wastefulness resulting from ill-directed and inefficient
motions”.
• Objective: to standardize activities for
workers/determine a full-day’s work
• Time and motion study involves :
breaking down the task into various elements, or motions,
eliminating unnecessary motions,
determining the best way to do the job, and
 timing each motion to determine the amount of production that could
be expected per day (without allowances for delays).

• He used stop - watch system to start and finish the test.
• This study permitted the determination of practical, relatively
precise and reliable standards of output.
2. Uniform method of routine tasks
Objective: to adjust worker with work.
 With this objective in mind he worked out such techniques as:
 Instruction cards,
 Order of work cards,

Material specialization,
Inventory control systems,
Material handling standards.
3. Functional foremanship study - which man for
which work.
Objective: to scientifically select the best worker for a given job
 It was concerned with assuring which man will be best for
which job, considering his initial skill and the potential for
learning.

4. Individual Incentive
Objective: to determine the appropriate wage or salary
 His study reached higher pay would serve as an incentive
for workers that would result from the increased
productivity.
 During his time there was a reduction of rates if the
workers earn beyond an acceptable limit.
 His view was efficient workers should be rewarded for their
productivity without limit.

 After Taylor conducted the above studies in 1911 he
wrote a book called principles of scientific
management.
• In his book he outlined four principles:
1.Develop a science for each element of a job, which
replaces the old rule-of-thumb method.
2. Heartily cooperate with the workers so as to insure all of the work
being done in accordance with the principles of the science which
has been developed.

3. Scientifically select and then train, teach and develop the worker.
4. There is an almost equal division of work and responsibly between
management and workers.
 The management takes over all work for which they are better fitted
than workers
 Taylor testified, however, that in order for these principles to be
successful “a complete mental revolution” on the part of
management and labor was required.
 Taylor believed that management and labor had a common
interest in increasing productivity.

Frank and Lillian Gilbreth (1868-1972)
 The Gilbreths were contemporaries of Taylor.
 Their accomplishments still stand out for their devotion to a single
goal:
 the elimination of waste and the discovery of the ‘one best way’ of doing work.
 He was determined to learn to lay bricks the ‘right’ way.
 In the end, he was able to develop a method which cut the motions
required to lay bricks.
 In so doing, he identified 17 on-the-job motions and called them
‘THERBLIGS’.

 The on-the-job motions are: search, find, select, grasp, position,
assemble, use, disassemble, inspect, load/transport, pre-position,
release load, transport empty, wait when avoidable, avoidable delay,
rest for overcoming fatigue, and plan and hold.
 For his work, Frank was named as ‘The Father of Motion Study’.
 After he died, Lillian was determined to continue his work. She
pioneered the field of personnel administration.
 She argued that the purpose of scientific management is to help
people reach their maximum potential by developing their skills and
abilities.

Henry L. Gantt (1861-1919)
 Gantt worked with Taylor at the Midvale Steel Company and was
early proponent of scientific management.
 Gantt is perhaps known for his development of ‘Gantt Chart’ - a
simple graph method of scheduling work according to the amount of
time required instead of the quantity of work to be performed.

2. Classical Organization Theory
• Scientific management was concerned with increasing the
productivity of the shop and the individual worker.
• The classical organization theory focused on the management of
the entire organization unlike the scientific management theory.
• Classical organization theory had two major purposes:
(a) develop basic principles that could guide the design, creation and
maintenance of large corporations, and
(b) identify the basic functions of managing organizations.

Henri Fayol (1841-1925)
• A French industrialist and a well-known contributor to
the administrative management theory, was born to a
middle class family near Lyon-France.
• To him management (administration) was not a personal
talent but a skill that could be taught.
• His efforts toward developing such theories were
published in

• General and Industrial Management,
 Henri Fayol is the one who identified:
A. The major types of activities involved in an industry or a business as
i. Technical - producing and managing products
ii. Commercial - buying raw materials and selling products
iii.Security: protecting employees and property
iv. Financial – search for and optimum use of capital
v. Accounting - recording and taking stock of costs, profits, and liabilities, keeping
balance sheets, profit and loss statements, etc
vi. Managerial – planning, organizing, commanding, coordinating and controlling

 These six elements, he said, will be found regardless of whether
the undertaking is simple or complex, big or small.
 Fayol’s primary focus was the managerial activity, because he
put managerial skill had been the most neglected, least
understood but the most crucial aspect of business operations.
B. Management as a separate field of study
Fayol said management is a discipline worth studying
He said there is a need for the introduction of formal managerial
training schools.

C. General management principles
Part of his thinking was expressed in the 14 principles of effective
management.
 Fayol hastened to explain in his monograph that he employed the word
principles, not laws or rules
 In his words, he said,

 “I prefer the word principles in order to avoid any idea of
rigidity, as there is nothing rigid or absolute in administrative
matters; everything is a question of degree. The same principle
is hardly ever applied twice in exactly the same way, because we
have to allow for different and changing circumstances, for
human beings who are equally different and changeable, and
for many other variable elements. The principles, too, are
flexible, and can be adopted to meet every need; it is just a
question of knowing how to use them.”

• The 14 principles that Fayol felt he had occasion to use most frequently were:
1. Division of labor
• Division of work (labor) encompasses three basic concepts:
i. Breaking down a task into its components.
ii. Training workers to become specialist in specific duties, and
iii.Putting activities in sequence so one person’s efforts build on another’s
2. Authority and responsibility
 Authority is the right to give orders, to exact obedience.
 Responsibility, on the other hand, is a sense of obligation that goes with
authority .

3. Discipline
 Fayol saw the necessity for discipline and precise and exact obedience at all
levels for the smooth running of a business.
 Members in an organization need to respect the rules and agreements that
govern the organization.
4. Unity of Command
 An employee should receive directives from only one superior.
5. Unity of Direction
 One head, one plan, one set of objectives.
 This improves coordination and ensures that energies are channeled in the
proper direction.

6. Subordination of individual interest to general interest/common
good
 In any undertaking, the goals and interests of an organization must take
precedence over those of individuals or groups of employees.
7. Centralization
 Fayol believed that managers should retain final responsibility but also
need to give their subordinates enough authority to do their jobs
properly.
8. Remuneration of personnel
 Compensation or wages for the work done should be fair and equitable
to both to workers and the organization.

9. Scalar Chain
 Scalar chain is the line of authority that extends from the top to the
bottom of an organization and defines the communication path.
10. Order
Order is best defined as “a place for everything (everyone) and
everything (everyone) in its/his place.
Materials and people should be in the right place at the right time.
11. Equity
Is dealing with subordinates, managers should be friendly, fair, kind
and lawful.

12. Stability of tenure of personnel
Trained and experienced workforce and management are crucial for
organizational success.
Labor turnover should be minimized and stability nurtured.
13. Initiative
To Fayol, the keenest interest for an intelligent executive is to be able
to scarify his personal vanity and instill those under him with the
attribute to make initiative.
14. Esprit de corps
The gist of this principle is that ' in union there is strength.'

3. Bureaucratic management theory
 It is a form of organization that is characterized by
division of labor, a clearly defined hierarchy, detailed
rules and regulations and impersonal relationships.
 The major contributor to this theory was Max Weber
(1864-1920), a German sociologist, consultant
professor, and author.

Max Weber:
 Reacted to the prevailing norms of class consciousness and nepotism
 Believed that the running organizations on the basis of whom one
knows rather than what one knows and engaging in nepotism
tended to interfere with organizational effectiveness.
 He formulated the characteristics of an ideal bureaucracy.
Major characteristics of Weber’s Ideal bureaucracy:
 Specialization: jobs are broken into routine, well-defined tasks so that
members know what is expected of them and can become extremely
competent at their particular subset of tasks.

 Formal rules and procedures: written rules and procedures
specifying the behaviors desired from members facilitate
coordination and ensure uniformity.
 Impersonality: rules, procedures, and sanctions are applied
uniformly regardless of individual personalities and personal
considerations
 Well-defined hierarchy: multiple levels of positions, which
carefully determined reporting relationships among levels
 Career advancement based on merit: selection and
promotion is based on qualification and performance of members.

Introduction to management Ch.2 PPT - Copy.ppt

3. Behavioral Management Theory
 It emphasized on human relations
 They used concepts from psychology, sociology and anthropology to
assist managers understand human behavior in the work place.
 They focused on motivation, communication, work group formation
and leadership.
 Behavioral management theory was stimulated by a number of writers
and theoretical movements.
 Among writers Abraham Maslow, Douglas Mc Gregor and Elton Mayo
were well-known.

The Hawthorne studies
 The Hawthorne studies (1924-1932) had their roots in the
logic of scientific management.
 The initial purpose of these experiments was to study the effect
of physical factors such as:
 illumination,
rest periods,
length of working days, and
the payment schemes up on productivity

 The studies were conducted at the Hawthorne plant of Western
Electric Company in Illinois, USA.
 The Hawthorne studies consist of four major experiments.
1. Illumination Experiments
• The intention of this experiment was to learn if there was any
correlation between intensity of light and productivity.

• To this effect two groups of women were taken:
 the experiment group - one subjected to variety in the intensity of light
and
 the other a controlled group which was exposed to constant illumination
intensity.
• After seeing this puzzle researchers concluded that illumination has little or
no effect on productivity.
2. Relay Assembly Test Room Experiment
• In the relay assembly test room experiment, Mayo and his associates placed
two groups of six women (five assemblers and a layout operator) with an
observer

• They were instructed to keep working at the regular pace.
• Researchers allowed the groups to choose their own rest periods
(were allowed to leave their work station without permission) and to
have a say in other suggested changes.
• A number of variables were tried: salaries, coffee breaks (rest
periods), refreshments, workday and workweek, temperature, and
noise.
• In one room job conditions were varied and in the other they were
not.

 Output went up in both the test room and controlled room
regardless of how the factors under consideration were
manipulated.
• However, when these changes were later terminated and
original conditions reestablished, output still remained high
 indicating that the change in conditions was not the only reason for the
increase in output.
• Mayo and his associates concluded that such physical changes
have no significant effect on productivity

• Supervisory management was the major reason for the increase in
productivity in the relay assembly test room study.
3. The Massive Interviewing Program
• After the first two phases, the researchers concluded that their attempt
to relate physical conditions of the job to productivity did not produce
any significant results.
• So they postulated that the human element in the work environment
apparently had a significantly greater impact on productivity than the
technical and physical aspects of the job.

 Over 20,000 interviews were conducted in the third phase of the
studies.
 The interviews begun by asking employees direct questions about
supervision and the work environment in general.
 The researchers realized that an individual's work performance,
position and status in the organization were determined not by that
person alone but also by the group members.
 Peers had an effect on individual performance.
 In order to study this more systematically, the research entered its
fourth and final phase

4. The Bank Wiring Observation Room Study
 Nine males who assembled terminal banks for telephone
exchanges were selected.
• This experiment focused on the effect of a group piecework
incentive pay.
• The assumption was that the workers would seek their own
economic interests by maximizing their productivity and that
faster workers would pressure the slower ones to improve their
efficiency.

• However, the researchers found that pressure was actually a form of
social behavior.
• In order to be accepted in the work group, the worker had to act in
accordance with group norms and be a "rate buster" by overproducing
or a "chiseler" by under producing.
• The researchers concluded that the work group set the fair rates for each
of its members.
• They found no relationship between productivity and intelligence,
dexterity, and other skills.

• They concluded that the wage incentive plan was less important in
determining an individual worker's output than was group
acceptance and security.
Findings and implications of Hawthorne
1. Physical working conditions did not seem to explain the changes that
were related in productivity.
2. There are other factors other than physical factors and monetary
incentives, which affect productivity. Theses factors are social and
psychological in nature.

 Social environment:
 Ability to talk to each other.
 The right to choose their rest periods.
 The right to leave the workstation without permission.
 The right to have a say in suggested changes.
 Psychological conditions
• Since they were selected as a member of the study group they felt social acceptance,
recognition, and social importance.
3. Workers are not motivated by the bodily needs only but also by social and psychological
needs.
4. A kind of managerial leadership capable of understanding individual and group behavior and
that would serve them through such skills as motivation and communication is necessary.

5. Hawthorne Effect: refers to the possibility that individuals singled out
for a study may improve their performance simply because of the added
attention they receive from researchers, rather than because of any
specific factor being tested in the study.
The attention given them led them to increase their output.
4. Modern approaches to management
 Modern management theory is really a rich mosaic of many theories
that have endured over at least the past century.
 Traditional organizational theories used a highly structured closed
system approach.

 But modern theories have moved towards the open system approach.
 The classical and neo classical approaches focused on the internal
management of the organization.
 They didn't take into consideration the effect of the external
environment on the organization and vice versa.
 Two of the most important contemporary viewpoints are the systems
and contingency theories.
1. Systems Theory
• The systems theory approach is based on the notion that organizations
can be visualized as systems.

• A System is a set of interrelated parts that operate as a whole in
pursuit of common goals.
• According to the systems approach, an organizational system
has four major components.
• Inputs - are the various human, financial, equipment and
informational resources required to produce goods and services.
• Transformation process - are the organization's managerial and
technological abilities that are applied to convert inputs in to
outputs.

• Outputs - are the products, services and other outcomes produced by the
organization.
• Feedback - is information about results and organizational status relative
to the environment. It is a key to system control.

Types of systems:
1. Open system
• It is one that continually interacts with its environment
• Therefore is well informed about changes within its surroundings
and its position relative to these changes.
• Organizations that operate closer to the open end of the system share
certain characteristics that help them survive and prosper.
• Some are: negative entropy, differentiation, and synergy.

Entropy - refers to the tendency of systems to decay over time.
 If a system does not bring in or receive inputs and energy from its
environment, it will eventually cease to exist.
Negative entropy is the ability of open systems to bring in new energy in
the form of inputs and feedback from the environment .
Differentiation - is the tendency of open systems to become more
complex.
Synergy - the main gist of this concept is "the whole is greater than the
sum of its parts.“

It emphasizes on the importance of working together in a
cooperative and coordinated fashion.
Steady state - the balance to be maintained between inputs flowing
in from the external environment and the corresponding outputs
returning to it.
An organization in steady state is not static, but in dynamic form
of equilibrium.

2. Closed system
 A closed system is a system that does little or no interaction with
its environment and receives little feedback. It has rigid
boundary.
 According to the systems viewpoint, managers are likely to be
more successful if they attempt to operate their units and
organizations as open systems.

2. Contingency theory
• Contingency theory is a viewpoint that argues that appropriate
managerial action depends on the particular parameters of the
situation.
• No universal principles that apply to every situation.
• Managerial decisions must be specific for specific situations by
recognizing the uniqueness of the environment.
• It states, "Nothing is best for all situations.“
• Managerial practices and technique that are appropriate in one area
might not be appropriate in another.

3. Integrative approach
 The initial premise of the integrative approach is that before
attempting to apply any concepts or ideas from the various schools
of management thought we must recognize:
the interdependence of units within the organization
the effects of environmental influences
the need to respond to the unique characteristics of the situation

Introduction to management Ch.2 PPT - Copy.ppt

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