Chapter 1

1. Chapter 1 Management and Its Evolution

2. Learning ObjectivesAfter reading this chapter, you should be able to: • Understand the challenges organizations face in the new millennium. • Specify the functions and roles of successful managers. • Explain the origins of management as an academic discipline. • Describe the bureaucratic and administrative approaches to the study of management. • Explain the behavioral perspective in analyzing management issues. • Interpret recent approaches to the study of management.

3. Why GM and Ford Lost While Toyota Won • Critical Thinking Questions focus on: • Financial situation of Ford and GM relative to Toyota • Differences in Management Style • How does Toyota beat Ford and GM on their own turf

4. The performance of organizations depends to a large extent on how their resources are allocated and their ability to adapt to changing conditions. Successful organizations know how to manage people and resources efficiently and effectively to accomplish organizational goals and to keep those goals in tune with changes in the external environment.

5. Management in the New Millennium • A firm can be efficient by making the best use of people, money, physical plant, and technology. • It is ineffective if its goals do not provide a sustained competitive advantage. • A firm with excellent goals would fail if it hired the wrong people, lost key contributors, relied on outdated technology, and made poor investment decisions.

6. Levels of Management Strategic Managers Tactical Managers Operational Managers

7. Strategic Managers • The firm’s senior executives with overall responsibility for the firm.

8. Tactical Managers • Responsible for translating the general goals and plans developed by strategic managers into specific objectives and activities.

9. Operational Managers • Lower-level managers who supervise the operations of the organization.

10. Today’s Organizations • More decentralization • Employees have more autonomy to define their jobs, prioritize tasks, allocate time, monitor their own work, and set their own objectives. • Empowerment allows employees to be less dependent on superiors to tell them what to do, and are encouraged to use their own ideas. • Department barriers are breaking down by creating more teams.

11. Teams Cross-functional teams • Composed of individuals from different parts of the organization Cross-disciplinary • Composed of team members with diverse background • Define the problem, set objectives, establish priorities, proposes new ways of doing things, and assigns members to different tasks.

12. Management • Traditionally taught in terms of its functions • Readily observed in terms of roles managers play

13. Management Functions Planning Organizing Leading Controlling

14. Planning • The management function that assesses the management environment to set future objectives and map out activities necessary to achieve those objectives. • To be effective, the objectives of individuals, teams, and management should be coordinated to support the firm’s mission.

15. Organizing • The management function that determines how the firm’s human, financial, physical, informational, and technical resources are arranged and coordinated to perform tasks to achieve desired goals. • The deployment of resources to achieve strategic goals.

16. Leading • The management function that energizes people to contribute their best individually and in cooperation with other people. • This involves: • Clearly communicating organizational goals • Inspiring and motivating employees • Providing an example for others to follow • Guiding others • Creating conditions that encourage management of diversity

17. Controlling • The management function that measures performance, compares it to objectives, implements necessary changes, and monitors progress. • Many of these issues involve feedback or identifying potential problems and taking corrective action.

18. Management daily activities • A typical day for me in a past life could include the following • Brief discussion between entrance and office • Check voice mail, email, snail mail • Secretary tells me schedule for the day • Approve or otherwise dispose of requests, reports, etc. that are pending or secretary says important • Attend a meeting • Move from meeting to another (different building?) • Field phone calls, sometimes cell and landline at the same time • Meet visitor with scheduled appointment • And this is before lunch

19. Management as a Set of Roles • As managers go about their day, perform activities similar to what I describe, they take on different roles. • Roles include: • Interpersonal roles - communication with superiors, peers, subordinates, and people from outside the organization. • Information Roles - obtaining, interpreting, and giving out information. • Decisional Roles - choosing among competing alternatives.

20. Interpersonal & Informational Roles Interpersonal Roles • Figurehead-visible personality representing an organization, department, or unit • Leader-energizes others to get the job done properly • Liaison-links together the activities of people both inside and outside of the organization. Informational Roles • Include monitor and disseminator

21. Decisional Roles • Entrepreneur-introduces changes in the organization • Disturbance handler-takes corrective action, provide damage control, and responds to unexpected situations or crisis • Resource allocator-assigns people and other resources to best meet organizational needs • Negotiator-reaches agreements and makes compromises

22. The Evolution of Management Thought Administrative Management Approach Early Management Thought Contemporary Management Approach Behavioral Perspective Bureaucratic Management Approach Operational Perspectives

23. A few words on “old” management theories • “Management” as a practice has been around since before the time of the Greeks and Romans. • Some civilizations which pre-date western civilization grappled with “management” issues three thousand years ago. • Some principles have not changed, only how these are defined, for example, “know the terrain” is now “competitive analysis.” • Technological and social changes have brought new ways of thinking.

24. Early Management Thought • Early ideas about management strategy • Sun Tzu, The Art of War • Early ideas about leadership • Nicolò Machiavelli, The Prince • Early ideas about the design and organization of work • Adam Smith, The Wealth of Nations • division of labor

25. The Operational Perspective • Scientific Management • Frederick W. Taylor • Quantitative Management • Ford W. Harris • Quality Management • Walter A. Shewhart

26. Taylor’s Four Principles of Scientific Management • Scientifically study each part of a task and develop the best method of performing the task. • Carefully select workers and train them to perform the task by using the scientifically developed method. • Cooperate fully with workers to ensure that they use the proper method. • Divide work and responsibility so that management is responsible for planning work methods using scientific principles and workers are responsible for executing the work accordingly.

27. Quantitative Management “Tools” • Quantitative tools from specific disciplines that drive management decisions • Break-even analysis – financial approach to determining ideal combination of price and volume given a set of costs • Economic Order Quantity – operations management tool to determine when to reorder materials, i.e. raw materials or finished products, given inventory holding costs and set-up costs

28. Quantitative Management “Tools” • Materials Requirement Planning (MRP) – operations management tool to achieve similar purpose, when to reorder; useful for processes where products are linked, e.g. demand for TV drives TV sets and antennas, which in turn drives demand for tubes, parts, etc. • Push system – once demand is determined, MRP system determines what to reorder and produce • Kanban system is an alternate – make one product at a time • Pull system - produce small lots, order parts and components as lot moves through system • Part of a broader Total Quality Management system

29. Total Quality Management (TQM) • Manufacturing operations traditionally reliant on such techniques as EOQ (Economic Order Quantity) and MRP (Materials Requirement Planning) • TQM approached based on statistical quality control methods and the following principles • Outputs vary around a mean • Think Michael Jordan taking foul shots • Output can be measured in terms of variation and mean • Output variation can be reduced by systematic methods • Output can be improved once sources of variation are minimized.

31. Bureaucratic Management Approach • Max Weber Key Characteristics • Specialization of labor • Formal rules and procedures • Impersonality • Well-defined hierarchy • Career advancement based on merit

32. Division of work Authority Discipline Unity of command Unity of direction Subordination of individual interest to the general interest Remuneration Centralization Scalar chain Order Equity Stability and tenure Initiative Esprit de corps Administrative Management Approach Henry Fayol’s 14 Principles of Management

33. Behavioral Perspective • Mary Parker Follett & the Hawthorne Studies • Mary Follett questioned the wisdom of scientific management because she believed it ignored many ways in which employees could contribute ideas and exercise initiative. • She advocated increased employee participation, autonomy, and organization of teams • It acknowledges that psychological and social processes of human behavior can result in improvements in productivity and work satisfaction.

34. Behavioral Perspective • The Hawthorne effect - when a manager shows concern for employees, their motivation and productivity levels are likely to improve. • Human Relations Approach - the relationship between employees and a supervisor is a vital aspect of management. • Employee motivation • Leadership style

35. Maslow’s Hierarchy of Needs Self-Actualization Need for Self Esteem Need for Social Relations Need for Security Physical Needs

36. McGregor’s Theory X and Theory Y • Leaders and managers who hold Theory X assumptions believe that employees are inherently lazy and lack ambition. • A negative perspective on human behavior. • Leaders and managers who hold Theory Y assumptions believe that most employees do not dislike work and want to make useful contributions to the organization. • A positive perspective on human behavior.

37. Examples • Scientific Management • Model T production • Assembly line operations continue to employ these principles • Bureaucratic Management • Government agencies including US Postal Service • Behavioral perspective • Newer companies

38. Contemporary Management Approach • Systems Theory • Contingency Theory • The Learning Organization Perspective

39. Systems Theory • Views the organization as a system of interrelated parts that function in a holistic way to achieve a common purpose. • Systems theory concepts that affect management thinking: • Open and closed systems • Subsystems • Synergy • Equifinality

40. Contingency Theory • States that there is no “one best way” to manage an organization. • Because what works for one organization may not work for another • Situational characteristics (contingencies) differ • Managers need to understand the key contingencies that determine the most effective management practices in a given situation

41. The Learning Organization • The management approach based on an organization anticipating change faster than its counterparts to have an advantage in the market over its competitors. • Rather than reacting to change , which is a normal part of the business landscape, organizations need to anticipate change so they are well positioned to satisfy customer needs.

42. Emerging Perspectives and Issues The Modular Organization • Every function not regarded as crucial is outsourced to an independent organization. • “Disaggregated Corporation” The Intangible Organization • Shifts from tangible (plant and equipment) to intangible (know-how and product design) investments • Mangers and employees in today’s companies focus on opportunities rather than efficiencies

44. Why GM and Ford Lost While Toyota Won • Responses to Critical Thinking Questions: • Ford and GM were pioneers in scientific management techniques • Ford was one of first to install production lines • GM was one of first to install divisional management structure • Both have failed to adapt to change • Toyota • Customer driven • Manages human resources well • Globalizing operations (more effectively than Ford or GM) • Moved operations to the US and succeeded

45. Minicase 1.2 (p. 42) • What management aspects are unique to Google as described in this case? • To what extent do you think Google’s management style may be effectively used by other organizations? • Comment on management style: • Comfort level of senior management may dictate what can be effectively used • Will attract some people and turn off others • Need to keep “troops” focused

46. Video: The entrepreneurial manager • Based on Video, on a sheet of paper, write a response to the first question (p. 26). • Exchange with your neighbor and discuss particularly in the context of second part of the question: How does this relate to Deming . . ? • Comments – first question • Focus on quality, pay attention to details, offer customers better products • Involve employees • Continuous improvement • Comments – second question • McFarlane was seeking higher order needs • Beyond security or monetary factors