A History of Management Thought Part 1

1. A History of Management Thought Part 1 MGT 424 Senior Seminar in Management Topics

2. Learning Objectives • Explain the emergence of the modern manager in the U.S. and Frederick Taylor’s work to develop “scientific management” • Know the European influence of Weber and Fayol on organization theory in developing administrative management.

3. Learning Objectives - Continue • Know the contribution of Hawthorne experiments (Mayo) to management; and, know the developments of management into human relations, quantitative approaches, organizational behavior, and the systems and contingency approaches. • Be familiar with the broad perspectives for management’s roles at differing organizational levels for a career and for business competitive advantage.

4. Timeline Historical Timeline

5. Professionalism of Management • Education: Late 19th Century Business taught in high schools/commercial schools = bookkeeping + secretarial skills. • Wharton (1881) – accounting, economics and law • University of Chicago & UC (Berkley), 1889 – undergrad schools of commerce • NYU & Dartmouth (Amos Tuck), 1900 • Harvard (1908) -focus on educating managers of large firms – commercial law, accounting and general commerce. Electives: Management in transportation, industry, marketing.

6. First Management Issues of Industry • How do we efficiently organize people at work with these new technologies of production and large markets? • How do we hire, pay, and coordinate people at work to gain productivity? • How do we do all of these to create economic wealth (profit)?

7. The Beginning of Management – Pay? • 1886 – Henry Towne, Pres. of Yale and Town Manufacturing Co., “The Engineer as Economist:” How do we relate work to increasing economic development? • Gain sharing” or “Towne Plan” – Link profits to worker’s pay: Wage rate + performance incentive– All savings in costs were shared with workers. • Halsey Plan: Sharing profits does not work. Bosses hide profits. Pay people on basis of a wage + 1/3rd pay incentive for higher productivity. • 1938 – Fair Labor Standards Act set min. wage at 25¢/hr

8. Frederick Winslow Taylor“Father of Modern Management” • In 1895- proposed a Piece Rate System: • Observe & Analyze – set the “standard” for job (use Time and Motion studies) • Pay workers for meeting/exceeding standard • Pay individual worker – not everyone, or group/department, or the “job” = pay according to individual value to business What Adam Smith had done for markets, Taylor does for the firm – place wealth creation squarely on the individual worker who is managed, rewarded for effort.

9. Frederick Taylor – Cont. • Biography: Wealthy Philadelphia Quaker family Worked in hydraulics factory as laborer/foreman/chief engineer • At 25 earned college degree in engineering • At 35- consultant: introduced functional foreman, production planning, differential pay= cut costs/increased production) • 1905 – wrote Shop Management • 1909-14: Lecturer at Harvard • Management consultant – US Navy and Army • 1911- Wrote Scientific Management

10. Frederick Taylor – Cont. • “Soldiering” – people don’t always try/work hard. WHY? • If we work hard and complete the job – no more work next day; fewer workers needed! • SO what is the amount of time needed to do the job? • How should it be performed – “One Best Way” • What is the standard?

11. Taylor’s 4 Principles of Scientific Management Taylor’s four principles of scientific management: • Work methods should be based on scientific observation – not “rules of thumb.” • Scientifically select, train, and develop each worker • Cooperate with workers to ensure that scientifically developed methods are being followed. • Managers analyze and plan work; workers actually perform the tasks.

12. Demise of Scientific Management • In hands of business – Scientific Management = tool to exploit labor • By 1915 – growing labor against “Taylorism” • Union members/100 workers: 1880=1.8; 1900=7.5; 1914=10.5 • Congress investigates and US Commission on Industrial Relations issues Hoxie Report (1915) declaring Scientific Management as exploitive of labor. • It will influence Management thought – but Scientific Management is dead – until rediscovered in Japan – the 1970/s wave of Quality Management

13. Frank and Lillian Gilbreth Frank Gilbreth – engineer; pioneered Scientific Methods in bricklaying. – Member of Taylor Society (SAM) Lillian Gilbreth – engineer/industrial psychologist (PhD); stress and fatigue Together 12 Children – Cheaper by the Dozen Time and motion studies – Breaking up each job action into its components (Therblig). – Finding better ways to perform the action. – Reorganizing each job action to be more efficient.

14. Management of the Organization • While in the US “Management” focuses on individual at work • In Europe early theory (that in 1930’s will become part of American “management”) focuses on the “organization” – Administrative Management Theory. • Max Weber (German) – focuses on bureaucracy as a formal organization to gain efficiency. • Henri Fayol (French) – focuses on 14 principles of Administration as “One Right Way”

15. Weber’s Principles of Bureaucracy 1. Formal authority comes from one’s organizational position (Bureaucracy = rational power) 2. Positions should be held based on merit, not social standing or personal contacts. (Break with traditional power) • Each position’s responsibilities and relationship to other positions should be clearly specified. (Roles) • Authority in a bureaucracy is hierarchical power. • Formalization = well-defined system of rules • (SoPs), operating procedures, and norms = control via “rational” power.

16. Henri Fayol’s Principles of Management • Division of Labor: allows for job specialization. • Authority and Responsibility: both formal and informal authority result from special expertise. • Unity of Command: workers have only one boss. • Line of Authority: clear chain of command, top to bottom of the firm. • Centralization: degree to which authority rests at the top of the organization. • Unity of Direction: single plan of action to guide the organization. • Equity - The provision of justice and the fair and impartial treatment of all employees.

17. Fayol - Continue • Order: place workers where most useful and have career opportunities. • Initiative: encourage employees to act on their own. • Discipline: workers need to obey • Remuneration of Personnel: pay what is fair. • Stability of Tenure of Personnel: Long-termemployment is important • Subordination of Individual Interest to the Common Interest: interest of organization priority • Esprit de corps: Have enthusiasm

18. Mary Parker Follett • Mary Parker Follett: The “Humanizing” of Management and focus on collaboration. • Taylor ignored the human side of the work, Follett argued: • Organizations are an interdependence of people. • People have own interests but also share common goals which should be the basis of conflict resolution. • Use of power/coercion creates conflict. People will defer to the facts of a situation for authority.

19. The Hawthorne Studies: New Direction The “Hawthorne Experiments” were a series of studies into worker productivity performed at the Cicero plant beginning in 1924 and ceasing in 1932, initially conducted by the National Research Council and later by Western Electric and Harvard University Illumination Studies, 1924 -1927: Does Use of Electric Lights Increase Productivity? Hypothesis: Increased illumination is correlated with higher productivity. Finding: No relationship “Hawthorne effect” or "halo effect“ – Researcher affects outcome (bias)

20. 2nd Hawthorne Experiment Relay Assembly Test Room Experiments, 1927-1929 Harvard research team set up experiment with 5 females from Relay Assembly area to test impact of incentives and work conditions on worker fatigue There is no conclusive evidence that these affected fatigue or productivity. Productivity and worker satisfaction increase when conditions are improved and made worse.

21. 3rd Hawthorne Experiment • Mica-Splitting Test group, 1928 – 1930 Relationship between work conditions and productivity, by maintaining a piece-rate incentive system and varying work conditions • Productivity increased by about 15% and researchers concluded that productivity was affected by non-pay considerations • Conclusion: social dynamics were the basis • of worker performance.

22. Hawthorne Interviews • Plant-wide Interview program, 1928-1931 1. Western Electric implemented a plant-wide survey of employees to record their concerns and grievances. From 1928 to 1930, 21,000 employees were interviewed. • 2. Data supported the research conclusion that work improved when supervisors began to pay attention to employees, that work takes place in a social context in which work and non-work considerations are important, norms and groups matter to workers.

23. Hawthorne : Final Experiment • Bank Wiring Observation group, 1931-1932 • The final test studying 14 male workers in the Bank Wiring factory to study the dynamics of the group when incentive pay was introduced. There was no effect. Why? Work group established a work “norm” – a shared expectation about how much work should be performed in a day and stuck to it, regardless of pay. • The conclusion: informal groups operate in the work environment to manage behavior.

24. Hawthorne Experiments - Importance • Changed perspective in management from Taylor’s engineering approach to a social sciences approach, leading to "Human Relations" approach and, later, "Organization Behavior" approach: • Engineering approach subordinated to social sciences • Managers = leaders, motivators, communicators • At one time major contributors to Management theory worked on Hawthorne experiments. • Elton Mayo - “Human Relations” approach (to 1950’s). Mayo’s views lead to the construction of manager as a leader.

25. McGregor: Theory X, Theory Y There are two ways of perceiving people at work: Theory Y: • Work is as natural as play or rest- not disliked.. • Workers will exercise self-direction and self-control • Meeting goals is satisfying and motivating. . • Workers seek responsibility. ... • Workers will be creative and are willing to do more. Theory X: • The average human inherently dislikes to work • So, people must be coerced, controlled, directed. • Workers prefer this – but want security. • The average worker is only partially utilized.

26. Management Science Approach • Post World War II – British use of mathematics, Operations Research, in military operations find applications in US post war industrial development. • Quantitative management — use of mathematic models, linear programming, simulation systems and chaos theory to solve management problems. • Operations management —techniques used to analyze all aspects of the production system.

27. Management Science Approach- Cont. • Total Quality Management (TQM) —analyzinginput, conversion, and output to increase product quality. • Management Information Systems (MIS) — provides information vital for effective decision making

28. Systems Approach

29. Contingency Approach • There is no “one best way.” • Organizing (and other) decisions that match the demands of the environment provide adaptation.

30. So-”What does a manager do?” It depends on where they are in the organization:

31. What do Top Managers Do?

32. Roles of Top Manager- Mintzberg 1. Interpersonal Roles: • Figurehead – represents organization and it’s authority • Leader – has power to make things happen • Liaison – makes contacts with peers and other managers 2. Informational Roles: • Gathers and processes information • Monitor – scan environment for relevant cues • Disseminator – passes selected information to those who need to know • Spokesperson – informs outsiders

33. Roles of Top Managers –Cont. 3. Decisional Roles: • Entrepreneur – searches for new idea to implement, keeps mental track of their progress • Disturbance handler – tries to keep conflicts in balance and arbitrates conflict • Resource allocator – decides who gets what (resources and power); personal basis of decision-making 4. The Integrated Job of Manager: • Implication for new manager – requirement for networks of information • Implication for Team Managers – requirement for information sharing

34. Implications for Effective Managers 1. Requires insight and introspection 2. Systematic ways to share information – manager’s monopoly versus periodic debriefing and exchanges 3. Ability to step back and see “big picture” – small emergencies detract; need to develop a “big picture” 4. Use your specialists – and they need to understand the need for urgency over elegance 5. See obligations as an opportunity and take time for introspection (thinking)

35. Implications for Business Education 1. Stress ‘cognitive learning “ – stress thinking skills over “skills” 2. Put students into situations to develop skills – peer relationships, negotiating, motivating, processing information, decision making under ambiguity