CHAPTER 2

THE EVOLUTION OF MANAGEMENT THEORY

1.2 WHY STUDY MANAGEMENT THEORY?

One has to understand how a management (or other) theory is built. A theory is built in stages: -

 Gathering data regarding a phenomenon (eg what managers do)

 Organizing it into categories (eg planning, organizing, leading, controlling)
 Highlighting significant similarities and differences
 Making generalizations explaining what causes what and under what circumstances.

2.3 UNDERSTANDING THE DIFFERENT MANAGEMENT THEORIES

A management theory is a group of assumptions advanced in order to elucidate the productivity

issue.
Figure 2.1, certain environmental forces are responsible for the evolution of management theory,
namely social, economic, technological, political, international, and ecological forces. New
technological breakthroughs in communication – such as the Internet – have caused managers to
reassess their approaches to management. The fact that knowledge workers will soon become the
dominant group in the workforce makes the contemporary manger’s job even more challenging.
The knowledge worker owns the means of production, namely knowledge, the in the new
economy. Knowledge is highly portable, which leads to a mobile workforce.

2.4 THE THEORIES OF MANAGEMENT

The theories of management can be classified into two main schools of thought, namely
classical approaches and contemporary approaches.

2.4.1 The classical approaches

The classical approaches extend from the late nineteenth century to the 1920’s.

Scientific management school

Frederick W. Taylor believed that there was one best way to perform any task.

Scientific management school (cont.)

He analysed each aspect of each task and measured everything measurable. A standard time for
the accomplishment of each task could be determined. This allowed him to describe performance
objectives quantitatively. This is known as time-and-motion study.

He believed that money motivated workers. Knowing what amounted to a fair day’s work, he
supported the individual piecework system as the basis for pay.

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The focus of scientific management

Scientific management focused on ways to improve the performance of individual workers.

Frank and Lillian Gilbreth focused on work simplification as an answer to the productivity
question. He changed an 18-step process into a five-step process and increased productivity by
about 200 per cent.

Henry L Gantt’s main concern was productivity at shop-floor level. His major contribution to
scientific management is a chart showing the relationship between work planned and completed
on one axis and time elapsed on the other.

In short, scientific management focused on the issue of managing work – not on managing
people.

This approach to managing work has obvious limitations.

First, workers cannot be viewed simply as parts of a smoothly running machine.

Second, the assumptions about the motivation of employees are stated too simplistically in these
approaches. Money is not the only motivator of workers.
In the third place, this approach to management creates the potential for the exploitation of labour
and therefore, possible strikes by workers.
Fourth, this approach can lead to ignorance of the relationship between the organisation and its
changing external environment.

The process (or administrative) approach

The process approach to management grew out of the need to find guidelines for managing
complex organisations such as factories. Planning, and the organisation of people n the
workplace, became the focus of consideration.

The focus of the process approach

The process approach to management focused on managing the total organisation.

Henry Fayol’s experience led him to conclude that there were five basic functions of
administration:

1. planning,
2. organizing,
3. commanding,
4. coordinating,
5. controlling.

1) Planning called for the formulation of goals.

2) Organising focused on the effective coordination of resources for
attaining the set goals.
3) Commanding was the art of leading people
4) Coordinating the activities of groups to provide unity of action ensure a smoothly
functioning organisation.

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5) Controlling involved seeing that everything was done according to the set plans and that
the stated goals were indeed attained.

According to Fayol, management is a skill – something that one can learn once its underlying
principles are understood.

A major disadvantage of the administrative approach to management is the fact that the approach
postulates that formal authority should be maintained by managers.

The bureaucratic approach

The main concern of Max Weber was the more fundamental issue of how organisations are
structured. He developed a theory of bureaucratic management that stressed the need for a
strictly defined hierarchy, governed by clearly defined regulations and authority. Weber’s ideal
bureaucracy is based on legal authority.

One of the major limitations of this approach is that bureaucratic rigidity results in mangers being
compensated for doing what they are told to do – not for thinking. Limited oranisational
flexibility and slow decision making are also limitations, which, in today’s turbulent
environment, can lead to golden business opportunities being lost.

2.4.2 Human relations movement

The early approaches to management emphasized the technical aspect of work as the expense of
its personal aspects. Managing people became the major issue facing managers, and managers
became more orientated to human relations and behavioural science.

The human relations approach to solving the productivity problem grew out of a famous series of
studies conducted at the Western Electric Company’s Hawthorne Works in Chicago, Illinois.
These studies became knows as the “Hawthorne Studies”.

“The “Hawthorne effect” - the studies concluded that group pressure, rather than management
demands, had the strongest influence on worker productivity. In short, employees were more
motivated by social needs than economic needs.

Maslow and McGregor are two well-known behavioural scientists. Maslow suggested that
human beings have five levels of needs. McGregor distinguished two alternative basic
assumptions about people and their approaches to work.

These two assumptions, which he called Theory X and Theory Y.

Theory X managers assume that workers must be constantly coaxed into putting effort into their
jobs. Workers, who must be motivated by force, money, or praise. This is consistent with the
early approaches, especially the scientific approach.

Theory Y managers assume that people relish work and approach their work as an opportunity to
develop their talents. This approach reflects the basic assumptions of the human relations as well
as the behavioural science approach to management.

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This approach viewed workers as human beings and not as machines. The belief that a happy
worker is a productive worker is too simplistic. Many favours play a role in the productivity of
workers, including a worker’s values, attitudes, learning, and motivation.

2.4.3. The quantitative management theory

The focus of the quantitative management theory.

This theory deals with mathematical models, statistics, and other models, and their use in
management decision-making. This school argues that management decisions should be based
on quantifiable information. The quantitative perspective comprises: -

 Management science
 Operation research (OR)

Management science deals with the development of mathematical models to assist managers in
decision-making. Operations research is an applied form of management science that helps
managers develop techniques to produce their products and services more efficiently.
Tools and techniques used today include linear programming, PERT/CPM, and regression
analysis. They can be used to develop product strategies, production scheduling, capital
budgeting, cash flow management and inventory control. It is used mainly as a tool or aid in
decision-making.

2.4.3 Contemporary approaches

The systems approach

The is approach compensated for the two main limitations of the classical approaches –
First, that they ignored the relationship between the organisation and its external environment
Second, that they focused on specific aspects of the organisation at the expense of other
considerations.

The systems approach to management views an organisation as a group of interrelated parts with
a single purpose: to remain in balance (equilibrium).

The open system perspective of an organisation is illustrated in figure 2.3. This figure depicts a
system as an interrelated set of elements functioning as a whole. It also depicts the organisation
as a system that comprises four elements:

 Input (resources):
 Transformation processes (managerial processes, systems, and so on);
 Outputs (products or services);
 Feedback (reaction from the environment).

The contingency approach

The contingency approach is based on the systems approach to management. The basic premise
of the contingency approach is that the application of management principles depends on the
particular situation that management faces at a given point in time.

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The contingency approach recognises that every organisation, even every department or unit
within the same organisation, is unique. The characteristics of the situation are called
“contingencies” and they can be of use in helping managers identify the situation. These
contingencies are:
 The organisation’s external environment
 The organisation’s own capabilities
 Managers and workers (their values, goals, skills, and attitudes)
 The technology used by the organisation.

Total quality management

It was inspired by a small group of quality experts, the most prominent of them being W Edwards
Deming.

Total quality management

Total: Quality involves everyone and all activities in the

organisation
Quality: Meeting customers’ agreed requirements, formal
and informal, at the lowest cost, first time every time.
Management: Quality must be managed.

TQM encompasses employees and suppliers, as well as the people who buy the organisation’s
products or services. The goal is to create an organisation committed to continuous
improvement.

TQM emphasizes actions to prevent mistakes; quality control consists of identifying mistakes
that may already have occurred.

Six Sigma

Six Sigma is a quality initiative that focuses on defects per million.

Potential quality is the known maximum possible value added per unit of input. Actual quality is
the current value added per unit of input. The difference between potential and actual quality is
waste. The focus of Six Sigma is on improving quality by helping organisations produce
products and services better, faster and more cheaply.

Six Sigma was initially designed to improve manufacturing processes, but these days the
techniques are being applied to various business areas, including sales, human resources and
customer service.

Six Sigma is defined as three different levels at Motorola University:-

 As a metric;
 As a methodology;
 As a management system.

Motorola consider that Six Sigma is all three at the same time.

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Six Sigma as a metric

Six Sigma equated to 3.4 defects per one million opportunities.

Six Sigma as a methodology

 Understanding requirements
 Aligning those requirements
 Utilizing data
 Driving rapid and sustainable improvement to business

At the heart of the methodology is the DMAIC model for process improvement. DMAIC is
commonly used by Six Sigma project teams and is an acronym for:-

 Define
 Opportunity
 Measure performance
 Analyse opportunity
 Improve performance
 Control performance

Six Sigma management system

Is a high-performance system for implement business strategy.

The learning organisation

The learning organisation is a management approach that is also based on the systems approach
to management. A learning organisation therefore requires learning individuals.

The seven learning disabilities are listed below:-

1. The delusion of learning from experience.

2. “ I hit him because he took my ball.”
3. The myth of teamwork.
4. “I am my position”.
5. “The enemy is out there.”
6. The illusion of taking charge
7. The parable of the boiled frog

According to Senge, five disciplines enable us to overcome these disabilities and create new
futures for the organisation. These disciplines are:-

 Becoming committed to lifelong learning:

 Challenging one’s own assumptions and generalizations about the organisation and the
world around it.
 Sharing a vision for the organisation;
 Encouraging active dialogue in the organisation.
 Promoting systems thinking.

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Re-engineering

Re-engineering involves a significant reassessment of what a particular organisation is all about.

It entails a fundatmental reappraisal of the way that organisations operate.

Hammer and Champy, re-engineering experts.

Re-engineering: a quantum leap

In the extreme, re-engineering assumes the current process is irrelevant-

It doesn’t work, it’s broken, forget it! Start over.
Re-engineering thus involves rethinking and redesigning the processes connecting organisational
members with people, such as customers and suppliers, outside the organisation. Speed, quality
of service, and overhead costs are some of the issues that re-engineering can address.

Compared to TQM, re-engineering blends the best of two worlds:

Drastic change – not merely incremental change

Respect for the smallest but most important details that make an organisation successful in the
eyes of the customers.

The following six conditions are vital for successful re-engineering:

1. Powerful external forces for change should make change inevitable.

2. Top management should vigorously back the re-engineering initiative.
3. Re-engineering projects should focus on the process improvements that customers really
care about and are willing to pay for.
4. Thorough knowledge of the needs of customers is therefore essential.
5. All major departments affected by the process (es) should be represented
on the team.
6. Changes in human resource programmes and information technology
should be closely coordinated with the re-engineering effort.

Successful re-engineering is an ongoing rather than a one-off project.

2.5 CURRENT AND NEAR-FUTURE MANAGEMENT REALITIES

The fact that the new competitive advantage lies in the human assets of organisations poses
unprecedented challenges to the modern manager. Managing this source of competitive
advantages requires that managers thoroughly grasp:

 How the current and near-future environments differ from previous ones;
 How today’s organisations differ from previous ones;
 The impact of both of the above on management.

Evolutionary environments are environments that are predictable. They change gradually, which
makes it possible to detect trends that can be forecast to determine what the future holds. A
revolutionary environment is known for its unpredictable, drastic change – also called
“discontinuous change”. Forecasting becomes impossible in these environments.
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