Organizational management in theory and practice

1. Organizational management in theory and practice Managing organizations in the changing world Mark Baron for KirstiSorama Ph.D., Principal Lecturer Seinäjoki University of Applied Sciences School of Business and Culture http://www.seamk.fi/In-English

2. History of management • The history of management extends to several thousand years into the past. • However, it is only since the late 19th century, that management is considered a formal discipline - in other words, the practice of management is as old as the human race but its theories and conceptual frameworks are of recent origin. • Yet most of the contemporary management thoughts are a twentieth century phenomenon.

3. History of management • While early writings on management principles came from experienced practitioners, the more recent writings tend to come from academic theorists, some of whom have had no direct experience in organizational management. • Although, today's management theory is the result of the interdisciplinary efforts of many people.

4. History of management Before 19th century Practices and techniques of manufacturing were based upon generations of tradition and craftsmanship Skills were carefully guarded 19th century Steam & Speed: Industry, Power & Social Change Growing middle-class demand for consumer goods Rail networks and steamship International trade Industrial base grow • The beginning of the modern organization occurred primarily during the middle of the nineteenth century with the rise of the factory system, principally in the textile industry, where automation and mass production became the cornerstone of productivity.  • Management thinking, however, was slow to evolve during the century. • The need existed to define what management was in the first instance as well as to operationalize it in meaningful terms for an organization.

5. Where work had been based for centuries on the tradition of guilds and trades in which skills were carefully safeguarded, the factories of the Industrial Revolution opened up jobs to unskilled laborers. Engineering became a science The further refinement of electricity, which had been a mere curiosity before: the telegraph, electric lights, and eventually radio followed. Each of these inventions changed the world in turn.

6. History of management • Consciousness raising: Management was to be viewed as a set of practices that could be studied and improved, too. • It was to be rooted in economics - achieving maximum efficiency with the resources provided.

7. History of management • During the brief history of management as a discipline a number of more or less separate schools of management thought have emerged, some broad, some narrow in scope, and some quite specialized • Each sees management from its own viewpoint; none is comprehensive • These viewpoints can provide several perspectives. • Today’s management is both a reflection of and a reaction to past management theories

8. Management Thought • The schools of management thought are theoretical frameworks for study of management • Management thinking progressed through several stages as scholars and practitioners working in different eras focused on what they believed to be important aspects of good management practice. • Over time, management thinkers have sought ways to organize and classify the voluminous information about management that has been collected and disseminated • These attempts at classification have resulted in the identification of management schools

9. The term ”management” encompasses an array of different functions undertaken to accomplish a task successfully • It is the process of designing and maintaining an environment (organization) in which individuals, working to gather in groups, efficiently accomplish selected aims • Management is all about ”getting things done”

10. Exercise • Form a group with 5-6 members • Choose one company (whatever company, which you all know), which has at least 50 employees • What is needed in the company to get things done? • Draw a picture where you put the items which you regard as important elements of organization

11. Customers Competitors Suppliers Operational environment PEOPLE Business Environment Knowledge, skills, motivation Outside the organization Outside the organization Information flow Power Organizational structure Control Information flow PROCESSES Flow of materials and products Flow of materials and products SYSTEMS NETWORKS NETWORKS Business Environment Assisting workflow and the flow of information Assisting efficiency of workflow Operational environment Inside the organization Customers Competitors Suppliers Inside the organization Information flow

13. The consciousness of management arise

14. The consciousness of people in organization arise

15. The consciousness of people as individuals in the system of organization arise

16. The consciousness of people as systems arisen

17. Decade of multidimensional nature of management

18. Decade of marketing thinking and human behavior

19. The decade of strategic thinking

20. Strategic thinking continues Focus: how to become excellent in your business

21. Companies as bundlers of intangible resources in fast changing world

22. The decade of innovation and innovativeness in the world of huge opportunities and threats

23. What next? How the future of management will look like? Is everything worth of saying about management already been said? https://www.youtube.com/watch?v=WMF-Z74C1QE

25. Organizational structure and control theory

27. http://www.youtube.com/watch?v=EryyxLI4IK8

28. Organizational theories which explain the organization and its structure can be broadly classified as classical or modern theories. • 1. CLASSICAL ORGANIZATION THEORY • Scientific management approach • Bureaucratic approach • Administrative approach • NEO-CLASSICAL APPROACH • 2. MODERN ORGANIZATION THEORY • Systems approach • Socio-technical approach • Contingency or Situational approach

29. Classical Theory • There are three Classical theorist who deal with the formal organization and concepts to increase management efficiency. Classical approaches Assumption: People are rational Administrative principle Henry Fayol Bureaucratic organization Max Weber Scientific management Frederick Taylor

30. Scientific Management • Underlying Assumptions • There is “One Best Way” to do a job • Workers are primarily motivated by increased earnings

31. Scientific Management 1. “One Best Way” to do a job By applying scientific methods of analysis, it is possible to breakdown the work into tasks and subtasks and rearrange them into the most efficient method of working 2. Workers are primarily motivated by increased earnings. By finding the best way of producing, productivity will rise and so workers should receive better wages. This is the basis of the argument that scientific management uses money as a motivator for workers.

32. Taylor’s Scientific management require managers to • Develop scientifically each operation to replace opinion and rule of thumb • Determine accurately correct time and methods for each job (time and motion studies) • Set up a suitable organization to take all responsibility from the workers except that of the actual job performance • Management and labor cooperation rather than conflict • Scientific selection and training of workers

33. Weber’s theory of bureaucracy • Primary focus: Organizational Structure • Cornerstone: Existence of written rules • Worker should respect the “right” of managers to direct activities dictated by organizational rules and procedures • Bureaucracy allows for the optimal form of authority - “rational authority” - rational application of rules or laws

34. Principles of Bureaucracy • A manager’s formal authority derives from the position he or she holds in the organization (STRUCTURE) • People should occupy positions because of their performance, not because of their social standing or personal contacts (SPECIALIZATION) • The extend of position’s formal authority and task responsibilities, and its relationship to other positions in an organization, should be clearly specified. (PREDICTABILITY AND STABILITY) • That authority can be exercised effectively in an organization, positions should be arranged hierarhically, so employees know whom to report and who reports to them. (RATIONALITY) • Managers must create a well-defined system of rules, standard operating procedures, and norms so that they can effectively control behavior within an organization. (DEMOCRACY)

36. Fayol’s early thoughts of administration Administrative department is specifically responsible for: • ensuring that unity of action, discipline, anticipation, activity, order, etc., exist in all parts of the enterprise; • recruiting, organizing and directing the workforce; • ensuring good relations between the various departments and with the outside world; • coordination of all efforts towards the overall goal; • satisfying shareholders and employees; labor and management.

37. Principles of administration: Unity of command Every action must be ordered by one person only or equally For any act the person who carries it out should receive orders from only one boss. • From Unity of Command flow several secondary principles, which are, as it were, corollaries of the fundamental principles: (2) the hierarchical transmission or orders, (3) the separation of powers, (4) centralization and (5) order

38. The rights, duties, responsibilities, and the place of each person must be determined and specified. • Fayol emphases organizational charts as a method • Organization must be in harmony with the environment • Fayol emphases foresight as a method to fit organization to it’s environment

39. Fayol would embellish ideas as the ``elements’’ or functions of the manager’s job: planning, organizing, commanding, coordinating and controlling • Fourteen Principles of Management (Tools for Accomplishing Objectives) • Division of work - limited set of tasks • Authority and Responsibility - right to give orders • Discipline - agreements and sanctions • Unity of Command - only one supervisor • Unity of Direction - one manager per set of activities • Subordination of Individual Interest to General Interest • Remuneration of Personnel - fair price for services • Centralization - reduce importance of subordinate’s role • Scalar Chain - Fayol’s bridge • Order - effective and efficient operations • Equity - kindliness and justice • Stability of Tenure of Personnel - sufficient time for familiarity • Initiative - managers should rely on workers’ initiative • Esprit de corps - “union is strength” “loyal members”

40. The major difference between Fayol and Taylor is Fayolism’s concern with the "human" and behavioral characteristics of employees and Fayol's focus on training management instead of focusing on individual worker efficiency. • Fayol stressed the importance and the practice of forecasting and planning in order to train management and improve workplace productivity.

41. Neo-Classical approach • INDIVIDUAL • WORK GROUP • PARTICIPATIVE MANAGEMENT • The human relations movement evolved as a reaction to the tough, authoritarian structure of classical theory. • Neoclassical theory displayed genuine concern for human needs

42. Neoclassical organizational theory: effective organizations are designed with flat hierarchical structures and a high degree of decentralization • Follows workflow and productivity of classical theory, but meets employee needs

43. Human Relations Approach • Hawthorne Studies (1924-1932) • Studies of how characteristics of the work setting affected worker fatigue and performance • Hawthorne effect — workers’ attitudes toward their managers affect the level of workers’ performance • Implications • Behavior of managers and workers in the work setting is as important in explaining the level of performance as the technical aspects of the task • Elton Mayo, Abraham Maslow, Douglas McGregor

44. Behavioral School • Douglas McGregor (1906–1964) • Developed the Theory X (traditional—negative—management approach) and Theory Y (positive management approach) to workers and work motivation. • Theory X assumes the average worker is lazy, dislikes work and will do as little as possible. • Workers have little ambition and wish to avoid responsibility • Managers must closely supervise and control through reward and punishment • Theory Y assumes workers are not lazy, they want to do a good job and the job itself will determine if the worker likes the work. • Managers should allow workers greater latitude, and create an organization to stimulate the workers.

46. Human Relations Approach • Behavioral management theory • An organization was viewed as a social system of people-to-people and people-to-work networks in which employees have both social needs and the desire to make meaningful contributions toward the accomplishment of organizational goals. • Mary Parker Follett (1868–1933) • Asserted that managers’ influence and power should flow from their knowledge and skill - “capacity for organized thinking” • Chester Barnard (1886–1961) • Provided insight into the concept of formal (consciously created) and informal (spontaneous) organizations within firms - the role of the executive in creating an atmosphere - manager's authority is derived from subordinates' acceptance

47. Barnard formulated two theories: one of authority and the other of incentives. He set the rules: • The channels of communication should be definite; • Everyone should know of the channels of communication; • Everyone should have access to the formal channels of communication; • Lines of communication should be as short and as direct as possible; • Competence of persons serving as communication centers should be adequate; • The line of communication should not be interrupted when the organization is functioning; • Every communication should be authenticated.

48. Behavioral School • Herbert Simon (1916 – 2001) • Studied decision-making within organizations • Programmed vs. un-programmed • Developed the “science” of improved organizational decision-making through quantitative methodssuch as operations research and computer technology • Theory of bounded rationality of human beings who “satisfice” because they do not have the intellectual capacity to maximize

49. Characteristics of modern • approaches include: • Systems viewpoint • Dynamic process of interaction • Multi-leveled and multi-dimensional • Multi-motivated • Probabilistic • Multi-disciplinary • Descriptive • Multi-variable • Adaptive

50. Modern understandings of the organization can be broadly classified into: • The systems approach • Socio-technical theory • Contingency or situational approach