INTRODUCTION TO BUSINESS
Assoc. Prof. Dr. Yasemin BAL
EVOLUTION OF MANAGEMENT
THEORY
MANAGEMENT
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 to accomplish
organizational goals and to keep those goals
in tune with changes in the external
environment.
MANAGEMENT
Getting resources together and properly utilizing
them in order to accomplish the pre-set
objectives describes the practice of
management.
Management is both an art and science. It is
considered to be the oldest art.
Management is also a science it requires logic,
rational thinking and analysis through the
systematic observation of the practices.
SCIENTIFIC MANAGEMENT THEORY
Modern management began in the
late 19th century.
Organizations were seeking ways to
better satisfy customer needs.
Machinery was changing the way
goods were produced.
Managers had to increase the
efficiency of the worker-task mix.
SCIENTIFIC MANAGEMENT
FREDERICK W. TAYLOR
Defined by Frederick Taylor, late
1800’s.
The systematic study of the
relationships between people
and tasks to redesign the work
for higher efficiency.
Taylor aimed to reduce the time
a worker spent on each task by
optimizing the way the task was
done.
THE 4 PRINCIPLES
4 Principles to increase efficiency:
1. Study the way the job is performed now &
determine new ways to do it.
Gather detailed, time and motion information.
Try different methods to see which is best.
2. Codify the new method into rules.
Teach to all workers.
3. Select workers whose skills match the rules
set in Step 2.
4. Establish a fair level of performance and pay
for higher performance.
Workers should benefit from higher output.
ADMINISTRATIVE MANAGEMENT
HENRI FAYOL
It has a macro perspective for
management.
The 5 functions of
management and 14
principles of management
were identified by Fayol.
The theory has an important
contribution to management.
FAYOLS’S PRINCIPLES
Henri Fayol, developed a set of 14 principles:
1. Division of Labor: allows for job specialization.
Fayol noted firms can have too much specialization leading to poor
quality and worker involvement.
2. Authority and Responsibility: Fayol included both formal and informal
authority resulting from special expertise.
3. Unity of Command: Employees should have only one boss.
4. Line of Authority: a clear chain from top to bottom of the firm.
5. Centralization: the degree to which authority rests at the very top.
FAYOLS’S PRINCIPLES
6. Unity of Direction: One plan of action to guide the
organization.
7. Equity: Treat all employees fairly in justice and
respect.
8. Order: Each employee is put where they have the
most value.
9. Initiative: Encourage innovation.
10. Discipline: Respectful employees needed.
FAYOLS’S PRINCIPLES
11. Remuneration of Personnel: The payment system
contributes to success.
12. Stability of Tenure: Long-term employment is
important.
13. General interest over individual interest: The
organization takes precedence over the individual.
14. Esprit de corps: Share enthusiasm or devotion to the
organization.
BUREAUCRATIC MANAGEMENT
MAX WEBER
Seeks to create an organization
that leads to both efficiency
and effectiveness.
Max Weber developed the
concept of bureaucracy.
A formal system of
organization and
administration to ensure
effectiveness and efficiency.
Weber developed the 5
principles in the next figure.
BUREAUCRATIC PRINCIPLES
Written rules
System of task A Bureaucracy Hierarchy of
relationships should have authority
Fair evaluation
and reward
BUREAUCRATIC MANAGEMENT
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. People
should know what is expected of them.
Lines of authority should be clearly identified.
Workers know who reports to who.
BEHAVIORAL MANAGEMENT
Focuses on the way a manager should
personally manage to motivate employees.
Mary Parker Follett: an influential leader in
early managerial theory.
Suggested workers help in analyzing their jobs
for improvements.
The worker knows the best way to improve the
job.
If workers have the knowledge of the task, then
they should control the task.
THE HAWTHORNE STUDIES
Study of worker efficiency at the
Hawthorne Works of the Western Electric
Co. during 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,
productivity rose.
Actually, it appears that the workers
enjoyed the attention they received as
part of the study and were more
productive.
THE HAWTHORNE STUDIES
THEORY X AND Y
Douglas McGregor proposed the two
different sets of worker assumptions.
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 the worker great latitude, and
create an organization to stimulate the worker.
THEORY X & THEORY Y
Theory X Theory Y
Employee is lazy Employee is not
lazy
Managers must
closely supervise Must create work
setting to build
Create strict rules initiative
& defined rewards
Provide authority to
workers
MANAGEMENT SCIENCE
Uses rigorous quantitative techniques to
maximize 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
improved quality.
Management Information Systems (MIS):
provides information about the organization.
ORGANIZATION-ENVIRONMENT THEORY
Considers relationships inside and outside
the organization.
The environment consists of forces, conditions,
and influences outside the organization.
Systems theory considers the impact of
stages:
Input: acquire external resources.
Conversion: inputs are processed into goods and
services.
Output: finished goods are released into the
environment.
SYSTEMS CONSIDERATIONS
An open system interacts with the
environment. A closed system is self-
contained.
Closed systems often undergo entropy and lose
the ability to control itself, and fails.
Synergy: performance gains of the whole
surpass the components.
Synergy is only possible in a coordinated
system.
THE ORGANIZATION AS AN OPEN SYSTEM
Input Stage Conversion Output
Stage Stage
Raw
Materials Machines Goods
Human skills Services
Sales of outputs
Firm can then buy inputs
CONTINGENCY THEORY
Assumes there is no one best way to
manage.
Theenvironment impacts the organization and
managers must be flexible to react to
environmental changes.
Theway the organization is designed, control
systems selected, depend on the environment.
Technological environments change
rapidly, so must managers.
STRUCTURES
Mechanistic: Authority is centralized at the
top. (Theory X)
Employees closely monitored and managed.
Very efficient in a stable environment.
Organic: Authority is decentralized
throughout employees. (Theory Y)
Much looser control than mechanistic.
Managers can react quickly to changing
environment.