December 29, 2014

Evolution of Management Thought and Theory - Review Notes

HAPPY NEW YEAR - BEST WISHES FOR A VERY HAPPY AND PROSPEROUS 2015

2015 - Start of Management Knowledge Revision for the Year on 19 January
January Month Management Knowledge Revision


Organization of human beings for the attainment of common objectives is ages old. But in the scientific tradition, development of management theory is only around 100 years old.

Adam Smith did mention issues of entrepreneurship and increased efficiency due to specialisation. Marshall also touched upon efficiency in industrial work. But serious attention to individual firm issues in economics occurred only after 1940s.

Charles Babbage documented some issues related to efficiency of manufactures. But it was F.W. Taylor who gave the call for development of science by managers for all human activities in production processes and by implication for all man-machine activity and laid the foundation for development of theory in management in 1911. Following the scientific method,  subsequent to Taylor number of books and monographs appeared.  Henri Fayol in 1916, came out with the explanation for management as an activity distinct from other industrial activities - technical, commercial, financial, accounting and security.

Fayol came out with the list of functions of management as planning, organizing, command, co-ordination and control.  L. Gulick and L. Urwick expanded it to POSDCORB. Koontz and O'Donnell suggested planning, organizing, staffing, directing and control. This approach of explaining management theory is being called operational approach.

Professors and researchers belonging to Psychology field have developed management related theories practices related to human behavior in organizations. Sociologists also brought in their knowledge of group behavior.

Statisticians found that management requires forecasting and statistical forecasting techniques have application. Then they developed application of statistical samples in process control and in reducing 100% inspection to inspections based on samples. Quality management area has benefitted a lot form statistical thinking. Six sigma, a technique to investigate the process to reduce its variance based on experiments and the statistical analysis of resulting data has given significant benefits to organization to reduce defects and costs.

Operations research is application of scientific method to business decision making thought earlier to be complex. OR scholars formulated the complex decision making situations into mathematical models involving objective functions and constraints and developed procedures to find optimal combinations of decision variables. A large number of business decisions became better and managers were forced to include quantitative methods in their day to day functioning.

The advent of computers also brought a change in management practice. Commercial transactions are being now done using computers at both ends. Data is being captured and analyzed by the computer programs. Hence lot data processing earlier done human component is now being done by computers. Hence there was a drastic reengineering of business processes.

The development of management through various disciplines is being described in more detail in individual articles.


Scientific Management


Scientific management - Taylor

F.W. Taylor identified that efficiency of processes is not getting adequate attention of the managers. He focused his attention on using machine tools in machines shops more efficiently by employing higher cutting speeds, feeds and depths of cut. For that purpose he conducted number of experiments and from the data, he developed the laws of economic machining.

From the success, that he has achieved in improving the efficiency of use of machine tools, Taylor's attention moved to other production processes.  Taylor recognized the importance of man's effort in man-machine systems and he came to the conclusion that completing an activity in less time leads to efficiency. That insight led to the development of time study. Taylor developed the technique of time study and starting doing time studies of various ways of doing the same work. That helped in identifying the most efficient method of doing that element of the work and Taylor advocated that management train all the operators doing that activity in the most efficient method. Time study also allowed study of various operators doing the same activity and helped in identifying the most efficient method and in training all other operators in that method. Using time study as the foundation, Taylor varied sizes and shapes of various hand tools used by workmen and came out with identifying the best tools to be used in an activity.

Thus, management has to take care of efficiency,  is the first major development in modern management thought. Taylor being an engineer, advocated the teaching of principles of efficiency to engineers through a subject named industrial engineering.

General management - Fayol


Fayol is the CEO and Chairman of a mining company. He brought out the fact that management is not being taught as a subject. He advocated that management can be taught as a subject.

He presented a paper outlining the content that can be taught. Fayol discussed the ideas of Taylor in his paper and advocated that Taylor's ideas are applicable in many more work systems.

Contribution of Behavioral school


The behavioral school identified more variable capable of increasing productivity apart from the technology or process improvement and financial incentives identified and advocated by Taylor, other proponents of scientific management and industrial engineering.  They found that the improvement in productivity is also due to such social factors as morale, satisfactory interrelationships between members of  work group (a sense of belonging), and effective management - a kind of managing that takes into account human behavior, especially group behavior and maintains a climate where the worker feels psychologically and socially satisfied.

In terms of scholars and managers who contributed to the behavioral school, Hugo Munsterberg published Psychology and Industrial Efficiency in 1912. Lillian Gilbreth published Psychology of Management in 1914. Elton Mayo, F.J. Roethlisberger and others undertook famous Hawthorne experiments during 1927 to 1932.

Quantitative School


The contributors from this school converted many management problems into mathematical models and solved them for coming out with optimal decisions. Decisions that will provide maximum profits for the given or assumed situation or minimum costs.

Systems Approach


Systems approach in one way is an extension of mathematical approach whereby, the entire working of an organization is modeled and its working over a period of time is visualized through repeated cycles. Many times the outputs of the system feed into the system as inputs for the next period and system behavior can change based on these inputs. For example, profits are ploughed back and capital of the organization increase enabling the organization to grow. Customer happiness or unhappiness becomes an input for the next period. Similarly job satisfaction of the employees is also a variable which is an output in one period and becomes input for the next period.  Government,  general public and media may also become stakeholders and have their impact on the organization.

See what this lecture on A Systems Approach to Airport Systems Planning, Design and Management explains the approach

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MIT Systems Design Management Course Video
Prof Richard de Neufville




Management Timeline - From Ancient Days
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Approaches to Management Analysis
(List given by Heinz Weihrich, Mark V. Cannice and Harold Koontz)

Empirical or Case Approach

Managerial Roles Approach

Contingency or Situational Approach

Mathematical or Management Science Approach

Decision Theory Approach

Reengineering Approach

Systems Approach

Sociotechnical Systems Approach

Cooperative Social Systems Approach

Group Behavior Approach

Interpersonal Behavior Approach

McKinsey's 7-S Framework

Total Quality Management Approach

Management Process or Operational Approach


Koontz and O'Donnell now  Weirich, Cannice and Koontz integrate and discuss the important ideas of all  the above approaches and present it under the

Management process framework  - Planning - Organizing -Staffing - Leading - Controlling


Reference

Management: A Global and Entrepreneurial Perspective
Henry Weihrich, Mark V. Cannice and Harold Koontz
13 Edition, 2010

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