The Evolution of

Management Theory
 Learning Objectives
• After studying the chapter, you should be able to:
– Describe how the need to increase organizational
efficiency and effectiveness has guided the evolution of
management theory.
– Explain the principle of job specialization and division of
labor, and tell why the study of person-task relationships
is central to the pursuit of increased efficiency.
– Identify the principles of administration and organization
that underlie effective organizations.
– Trace the change in theories about how managers should
behave to motivate and control employees
 Learning Objectives (cont’d)
– Explain the contributions of management science
to the efficient use of organizational resources.
– Explain why the study of the external environment
and its impact on an organization has become a
central issue in management thought.
 Chapter Outline
• Scientific Management Theory
– Job Specialization and the Division of Labor
– F. W. Taylor and Scientific Management
– The Gilbreths
• Administrative Management Theory
– The Theory of Bureaucracy
– Fayol’s Principles of Management
• Behavioral Management Theory
– The Work of Mary Parker Follett
– The Hawthorne Studies and Human Relations
 Chapter Outline (cont’d)
• Behavioral Management Theory (cont’d)
– Theory X and Theory Y
• Management Science Theory
• Organizational Environment Theory
– The Open Systems View
– Contingency Theory
 Scientific Management Theory
• Evolution of Modern Management
– Began in the industrial revolution in the late 19th century
as:
• Managers of organizations began seeking ways to better satisfy
customer needs.
• Large-scale mechanized manufacturing began to supplanting
small-scale craft production in the ways in which goods were
produced.
• Social problems developed in the large groups of workers
employed under the factory system.
• Managers began to focus on increasing the efficiency of the
worker-task mix.
 The Evolution of Management Theory

Source: Figure 2.1

 Job Specialization and
the Division of Labor

• Adam Smith (18th century economist)

– Observed that firms manufactured pins in one
of two different ways:
• Craft-style—each worker did all steps.
• Production—each worker specialized in one step.
– Realized that job specialization resulted in
much higher efficiency and productivity
• Breaking down the total job allowed for the division
of labor in which workers became very skilled at
their specific tasks.
 F.W. Taylor and Scientific Management

• Scientific Management
– The systematic study of the relationships between
people and tasks for the purpose of redesigning
the work process for higher efficiency.
• Defined by Frederick Taylor in the late 1800’s to replace
informal rule of thumb knowledge.
• Taylor sought to reduce the time a worker spent on
each task by optimizing the way the task was done.
 Four Principles of Scientific Management

• Principles to increase efficiency:

1. Study the ways jobs are performed now and determine
new ways to do them.
• Gather detailed time and motion information.
• Try different methods to see which is best.
2. Codify the new methods into rules.
• Teach to all workers the new method.
3. Select workers whose skills match the rules.
4. Establish fair levels of performance and pay a premium for
higher performance.
• Workers should benefit from higher output
 Problems with Scientific Management

• Managers frequently implemented only the

increased output side of Taylor’s plan.
– Workers did not share in the increased output.
• Specialized jobs became very boring, dull.
– Workers ended up distrusting the Scientific
Management method.
• Workers could purposely “under-perform.”
– Management responded with increased use of
machines and conveyors belts.
 Frank and Lillian Gilbreth
• Refined Taylor’s work and made many
improvements to the methodologies of time and
motion studies.
– Time and motion studies
• Breaking up each job action into its components.
• Finding better ways to perform the action.
• Reorganizing each job action to be more efficient.
• Also studied worker-related fatigue problems
caused by lighting, heating, and the design of tools
and machines.
 Administrative Management Theory

• Administrative Management
– The study of how to create an organizational
structure that leads to high efficiency and
effectiveness.
• Max Weber
– Developed the concept of bureaucracy as a formal
system of organization and administration
designed to ensure efficiency and effectiveness.
 Weber’s
Principles of
Bureaucracy

Figure 2.2
 Weber’s Five Principles of
Bureaucracy
• Authority is the power to hold people accountable
for their actions.
• Positions in the firm should be held based on
performance, not social contacts.
• Position duties are clearly identified so that people
know what is expected of them.
• Lines of authority should be clearly identified such
that workers know who reports to who.
• Rules, standard operating procedures (SOPs), and
norms guide the firm’s operations.
 Fayol’s Principles of Management
• Division of Labor: allows for job specialization.
– Fayol noted jobs can have too much specialization
leading to poor quality and worker dissatisfaction.
• Authority and Responsibility
– Fayol included both formal and informal authority
resulting from special expertise.
• Unity of Command
– Employees should have only one boss.
 Fayol’s Principles of Management
(cont’d)
• Line of Authority
– A clear chain of command from top to bottom of
the firm.
• Centralization
– The degree to which authority rests at the top of
the organization.
• Unity of Direction
– A single plan of action to guide the organization.
 Fayol’s Principles of Management
(cont’d)
• Equity
– The provision of justice and the fair and impartial
treatment of all employees.
• Order
– The arrangement of employees where they will be
of the most value to the organization and to
provide career opportunities.
• Initiative
– The fostering of creativity and innovation by
encouraging employees to act on their own.
 Fayol’s Principles of Management
(cont’d)
• Discipline
– Obedient, applied, respectful employees are
necessary for the organization to function.
• Remuneration of Personnel
– An equitable uniform payment system that
motivates contributes to organizational success.
• Stability of Tenure of Personnel
– Long-term employment is important for the
development of skills that improve the
organization’s performance.
 Fayol’s Principles of Management
(cont’d)
• Subordination of Individual Interest to the
Common Interest
– The interest of the organization takes precedence
over that of the individual employee.
• Esprit de corps
– Comradeship, shared enthusiasm foster devotion
to the common cause (organization).
 Behavioral Management Theory
• Behavioral Management
– The study of how managers should behave to
motivate employees and encourage them to
perform at high levels and be committed to the
achievement of organizational goals.
– Focuses on the way a manager should personally
manage to motivate employees.
 Behavioral Management
• Mary Parker Follett
– An influential leader in early managerial theory
– Held a horizontal view of power and authority in
organizations
• Suggested workers help in analyzing their jobs for
improvements—the worker knows the best way to
improve the job.
• If workers have relevant knowledge of the task, then
they should control the task.
 The Hawthorne Studies
• Studies of how characteristics of the work
setting affected worker fatigue and
performance at the Hawthorne Works of the
Western Electric Company from 1924-1932.
– Worker productivity was measured at various
levels of light illumination.
– Researchers found that regardless of whether the
light levels were raised or lowered, worker
productivity increased.
 The Hawthorne Studies
• Human Relations Implications
– Hawthorne effect—workers responded to the
attention they received and were more
productive.
– Managers should be behaviorally trained to
manage subordinates to elicit their cooperation
and increase their productivity.
– Groups impose informal performance norms on
their members (both “rate busters” and
“chiselers”)
– Gave rise to the field of Organizational Behavior
 Theory X and Theory Y
• Douglas McGregor proposed the two different
sets of assumptions about workers.
– Theory X assumes the average worker is lazy,
dislikes work and will do as little as possible.
• Managers must closely supervise and control through
reward and punishment.
– Theory Y assumes workers are not lazy, 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.
 Theory X versus Theory Y

Source: Figure 2.3

 Theory Z

• William Ouchi researched the cultural

differences between Japan and USA.
– USA culture emphasizes the individual, and
managers tend to feel workers follow the Theory X
model.
– Japan culture expects worker committed to the
organization first and thus behave differently than
USA workers.
• Theory Z combines parts of both the USA and
Japan structure.
– Managers stress long-term employment, work-
group, and organizational focus. 2–27
 Management Science Theory
• An approach to management that uses
rigorous quantitative techniques to maximize
the use of organizational resources.
– Quantitative management—utilizes linear
programming, modeling, simulation systems.
– Operations management—techniques to analyze
all aspects of the production system.
– Total Quality Management (TQM)—focuses on
improving quality throughout an organization.
– Management Information Systems (MIS)—
provides information about the organization.
Organizational Environment Theory
• Organizational Environment
– The set of forces and conditions that operate
beyond an organization’s boundaries but affect a
manager’s ability to acquire and utilize resources.
• .
 The Open-Systems View
• Open System
– A system that takes resources for its external
environment and converts them into goods and
services that are then sent back to that
environment for purchase by customers.
– Inputs: the acquisition of external resources.
– Conversion: the processing of inputs into goods
and services.
– Output: the release of finished goods into the
environment.
The Organization as an Open System

Figure 2.4
 Other System Considerations
• Closed system
– A system that is self-contained and thus not
affected by changes occurring in its external
environment.
– Often undergoes entropy and loses its ability to
control itself, and fails.
• Synergy
– Performance that results when individuals and
departments coordinate their actions
• Performance gains of the whole surpass the sum of the
performance of the individual components.
 Contingency Theory
• Contingency Theory
– The idea that the organizational structures and
control systems manager choose depend on—are
contingent on—characteristics of the external
environment in which the organization operates.
– Assumes there is no one best way to manage.
• The environment impacts the firm and managers must
be flexible to react to environmental changes.
– In rapidly changing organizational environments,
managers must find ways to coordinate different
departments to respond quickly and effectively.
 Contingency Theory of Organizational Design

Source: Figure 2.5

 Mechanistic and Organic
Structures
• Mechanistic Structure
– Authority is centralized at the top. (Theory X)
– Employees are closely monitored and managed.
– Can be very efficient in a stable environment.
• Organic structure
– Authority is decentralized throughout the
organization. (Theory Y)
– Tasks and roles are left ambiguous to encourage
employees to react quickly to changing
environment.