CHAPTER TWO: EVOLUTION OF MANAGEMENT

2.1. Pre classical Management concepts

Management as a process was used from ancient times. Management functions have existed for
thousands of years since people began to work in group. Though the principles of management, as
we know them today, are nowhere to be found in the ancient literature, there are enough
indications to show that the importance of management and organization was well recognized
even those days. Generally, had there not been considerable skill in the various management
functions, those monumental accomplishments such as the pyramid of Egypt, the Great wall of
China & Babylon, the monument in Axum & the temple in Lalibela, and the castle of Gondar
would not have been possible. A number of individuals in the pre-classical period began to offer
ideas for the nature of management. Among the principal pre-classical contributors are Robert
Owen, Charles Babbage and Adam smith.
Charles Babbage (1792-1871)
He was a British professor of mathematics, Charles Babbage become convinced that the
application of scientific principles to work processes would both increase productivity and lower
expenses. He was an early advocator of division of labor, believing that each factory operation
should be analyzed so that the various skills involved in the operation could be isolated. He had
also a strong understanding of the importance of human resources as related to efficiency. He
advocated profit sharing plans & bonus systems as ways to achieve better relations between
management and labor.
Robert Owen (1771-1858)
He was a successful textile mill manager in Scotland from 1800-1828. During that time, he
carried out most of his experiments in the area of management. He recognized that human
resources were as valuable as financial & material resources to the production of goods. He
believed that factory workers would be more productive if they were motivated through rewards
rather than punishments
He experienced with several motivating techniques. Some of them were:
• He improved working conditions within the factory, i.e., providing meals, bath facilities,

• Housing & marketing facilities.

• Reducing the workday to 10 ½ hrs. with no night work for children.

• Refused to hire children under the age of 10.

Because of his emphasis on the workers, he is regarded as the father of modern personnel
management.
Adam Smith (1723-1790)
 The contribution of Adam Smith to the management
 He wrote the Wealth of Nations (1776)
 He advocated the economic advantages that organizations and societies would gain from the
division of work.

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 He advocated the concepts of job specialization to increase the productivity of workers.
 He believed that increased productivity by increasing workers’ skills.
 The creation of labour saving inventions and machinery.

2.2. The Era of Classical Management

Classical management theory consists of a group of similar ideas on the managementof
organizations that evolved in the late 19th century and early 20th century. The Classical schoolis
sometimes called the traditional school of management among practitioners. This school, evolved
as a result of the industrial revolution, in response to the growth of large organizations and in
contrast to the handicraft system that existed till then. It contains three branches, namely,
scientific management, administrative principles and bureaucratic organization. The predominant
and common characteristic to all three branches is the emphasis on the economic rationality of
management and organization.
The economic rationality of the individual employee at work assumes that people choose the
course of action that maximizes their economic reward. In other words, economic rationality
assumes that people are motivated by economic incentives and that they make choices that yield
the greatest monetary benefit.
The primary contribution of the classical school of management includes:
 Application of science to the practice of management
 Development of the basic management functions and articulation and application of specific
principles of management.

2.2.1. SCIENTIFIC MANAGEMENT THEORY

Scientific management is an approach within classical management theory that emphasizes the
scientific study of work methods in order to improve worker efficiency. It is a systematic study
of work which originated in USA in 1900s i.e. it emphasizes on improving workers efficiency
through the scientific study of work. Their objective was to find the most efficient method for
performing any task and to train workers in that method. The emergence of industrial revolution
gave rise to factory production system and it in turn caused management to on focus developing
the most rational principles for handling its people, machines, and money. This challenge took
two forms:
1. How to increase productivity (output/input) by making the work easier to perform
2. How to motivate workers to take the advantage of new methods and techniques.
The principal contributors or pioneers of scientific management were:
• Frederick Winslow Taylor
• Frank and Lillian Gilberth (husband and wife)
• Henry Gantt
• Harrington Emerson
• Frank and Gilbert, Gantt and Emerson had supported Taylor’s efforts;
consequently they are credited as supporters/followers of Taylor.
All these followers of Taylor became famous in their own right. Together with Taylor they
revolutionized management thinking. Scientific management is the name given to the principles
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and practices that grew out of the work of Frederick Taylor and his followers and that are
characterized by concern for efficiency and systematization in management.
FREDERICK W. TAYLOR (1856-1915)
He was an American Engineer and worked in the Midvale steel co. as an apprentice pattern maker,
a common laborer, a foreman, a master mechanic and then a chief engineer of the steel co. That
gave him ample opportunity to know at first hand the problems & attitudes of workers and to see
the great opportunities for improving the quality of management.
His major concern was to increase efficiency in production, not only to cover costs and raise
profits but also to make possible increase in pay for workers through their higher productivity,
through one best of doing a job. Taylor wanted to find the most effective way to use people and
resources in the workplace. He believed that there was one best way of performing every process
and task in industry. He thought that, to find the best way, workers' performance of a task should
be examined scientifically, objectively, and in great detail, using an empirical and experimental
approach. Only then could a more productive way of doing the job be found.
After finding one best way of doing a job, managers should then teach it to the workers. He
thought that an incentive system rewarding fast workers and penalizing slow workers would
encourage them to adopt the new system. Taylor caved his plan the differential rate system. Under
this system, a man received on piece rate if he produced below the standard number of pieces and
another rate if he surpassed the standards, and in the latter case, the higher rate would be applied
to all the pieces he produced, not merely to those over the standard. He believed that scientific
methods would eventually replace intuition and rule-of thumb, which had been used in
organizations up until then.
Both in his testimony and in his two books, shop management and the principles of scientific
management, Taylor outlined his philosophy. It rested, he said, on five basic principles:
1. The development of a true science of management, so that the best method for performing
each task could be determined (avoiding rule of thumb).
2. The scientific selection of the workers, so that each worker would be given responsibility for
the task for which he or she is best suited.
3. The scientific education and development of the worker for their own and their company's
higher prosperity.
4. Intimate, friendly co-operation between management and labor. Since there is mutual interest
(economic benefit) in the organization, in order to achieve it, it needs mutual cooperation.
5. Work should be divided almost equally between management and workers. Workers should
not be always claimed for all inefficiencies in the organization. Managers should first
discharge their responsibility of identifying one best way doing a work.

Other Contributors of Scientific Management or Followers of Taylor

Among the other significant contributors to scientific management are the following:
Henry L. Gantt: Gantt was a contemporary and an associate and colleagues of Taylor at
Bethlehem Steel Company, and he strongly supported the idea scientific management propounded

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by Taylor, He emphasized the psychology of the worker and the importance of morale in
production. Gantt insisted that willingness to use correct methods and skills in performing a task
was as important as knowing the methods and having the skills. Thus he saw the importance of
the human element in productivity and proposed the concept of motivation as we understand
today. Gantt devised a wage-payment system and developed a charting system or control chart for
scheduling production operation which became the basis for modern scheduling techniques like
CPM and PERT.
Gantt made improvement in Taylor’s incentive system, and developed what is known as the “Task
and bonus plan”, this is the foundation of many incentive plans; the worker is paid a guaranteed
daily wage whether or not he completes the standard work. But if he completes for four hours
work in three hours and less he is paid for four hours.
Gantt is perhaps best known for his development of “Graphic methods” of describing plans and
make possible better managerial control. He emphasized the importance of time, as well as cost
consideration in planning and controlling work. This led eventually to the famous Gantt chart – a
chart used for planning and follows up work progress against time. The Gantt chart regarded by
some social historians as the most important social invention of the 20th c.
Frank and Lillian Gilbert: They husband and wife, have been regarded as important
contributors to scientific management and concentrated ontime-and-motion study to develop more
efficient ways of performing repetitive tasks. Time-and-motion study is a process of analyzing
jobs to determine the best movements for performing each task. Time-and-motion study and
piece-rate incentives are two major managerial practices developed by scientific management
theorists and widely used even today. The piece-rate incentive system envisagesthat the largest
amount of income goes to workers who produce the maximum output. In addition, scientific
selection and training of workers, importance of work design amid encouraging managers to seek
the best way of doing a job, development of a rational approach tosolving organization problems
and above all professionalization of management, are some of the other contributions of the
scientific management school.
Frank and Lillian Gilbreth: A construction contractor by trade, Frank Gilbreth gave up his
contracting career in 1912 to study scientific management after hearing Frederick Taylor speak ata
professional meeting. Frank and his wife, Lillian, a psychologist, studied work to eliminate
wasteful hand-and-body motions. The Gilbreths also experimented with the design and use of the
proper tools and equipment for optimising work performance. Frank Gilbreth is probably best
known for his experiments in bricklaying. By carefully analysing the bricklayer’s job, he reduced
the number of motions in laying exterior brick from 18 to about five, and in laying interior brick
from 18 to two. Using Gilbreth’s techniques, the bricklayer could be more productive and less
fatigued at the end of the day
Frank and Gilbreth reduced the number of movements in bricklaying from 18 to 5. This increased
the number productivity of bricklayers from 120 to 250 bricks per hours. Frank emphasized the
need of developing or discovering the “One best way of doing a given task”, whereas Gilbreth
concerned herself with the human aspect of management. Gilbreth held that the most important
cause of workers dissatisfaction was the lack of management’s interest in them.

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Frank and Gilbreth, both they emphasized that management should understand their needs and
personality. Frank–Gilbreth’s system becameknown as “Speed work” and the speed come not
from rushing the workers to work faster but from cutting down unnecessary [Link]
identified 18 on-the –job motions called them THERBLIGS. (Therbligs is Gilbreth’s spelt
backgrounds with the transportation of one letter).
Frank and Gilbreth also invented a flow chart which shows the progress of an entire organization
through time and various tasks involved it every operation broken down in to tasks which enable
the identification and elimination of unnecessary motion.
Harrington Emerson: he was one of the famous early scientific managers who believed in the
adoption of scientific management principles as a means of achieving efficiency. Emerson’s
major concepts were set forth in his book “the twelve principles of efficiency”(1913). Those
principles, state that a manager should carefully define objectives, use the scientific method of
analysis, develop and use standardized procedures, and reward employees for good work.

Assessing Scientific Management

Scientific management was successful in increasing productivity and consequently increasing the
wealth that improved living standard of the workers. The proponents (followers) of scientific
management believe that workers are motivated primarily by a desire to earn money to satisfy
their economic and physical needs. However, they failed that workers have social needs and that
working conditions and job satisfactions are often equally important.

2.2.2. CLASSICAL ORGANIZATION THEORY

Scientific management was concerned with increasing the productivity of the shop and the
individual worker. The other branch of classical management- classical organization theory-grew
out of the need to find guidelines for managing complex organizations. That is, the classical
organization theory focused on the management of the entire organization unlike the scientific
management theory, which focused on production. Classical organization theory had two major
purposes: (a) develop basic principles that could guide the design, creation and maintenance of
large corporations, and (b) identify the basic functions of managing organizations.
While pioneers of the scientific management tried to determine the best way to perform a job,
those in the administrative management explored the possibilities of an ideal way to put all jobs
together and operate an organization. Thus the emphasis of administrative or general management
theory is on finding ‘the best way’ to run an organization. This school of thought is also called
administrative or traditional principles of management. Henry Fayol (1841-1925), a French
industrialist, is the chief architect and the father of the administrative management theory. Other
prominent exponents include Chester I Barnard amid Colnel Lyndall Urwick (a British
management expert).

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HENRI FAYOL (1841-1925)
Henri Fayol (1841-1925) is generally hailed as the founder of the classical management school
not because he was the first to investigate managerial behavior, but because he was the first to
systematize it. Fayol believed that sound management practice falls into certain patterns that can
be identified and analyzed.
Fayol wrote during the same time period as Frederick Taylor. While Taylor was concerned with
first-line managers and the scientific method, Fayol’s attention was directed at the activities of all
managers. He wrote from personal experience, as he was the managing director of a large French
coal-mining firm. Fayol described the practice of management as something distinct from
accounting, finance, production, distribution and other typical business functions. He argued that
management was an activity common to all human endeavours in business, government and even
in the home. He then proceeded to state 14 principles of management – fundamental rules of
management that could be taught in schools and applied in all organisational situations.
His theory focuses on the total organization and attempts to develop rules and principles that will
direct managers to more efficient activities. (I.e. realizes the importance of efficiency at all levels).
Hence, he is credited as the ‘father of Modern Operations Management’.
Fayol classified business activities into six: (1) Technical activities-include activities of
production and manufacturing, (2) Commercial activities-include activities of buying, selling or
exchange, (3) Financial activities-include searching for and optimum use of capital, (4) Security
activities-include protection of property and persons, (5) accounting activities-include recording
and taking stock of costs, profits and liabilities, keeping balance sheets, and compiling statistics,
etc. and (6) managerial activities-include planning, organizing, commanding, coordinating, and
controlling.
Fayol felt that the first five activities were well known and performed by business people, but
little was known about the managerial activities and it had been the most neglected aspect of
business operations. Thus, he concentrated on/devoted much of his time on the analysis of the
managerial activities.
As the managing director of a mining company, Fayol developed a unified conceptof
management and broad administrative principles applicable to general and higher managerial
levels. He used the word ‘administration’ for what we call management. Fayol focused on
managerial levels and the organization as a whole. His perspective extended the beyond shop
level and the physical production processes and was of macro in nature. In his French book
‘Industrial and General Management’, He writes that all activities of business enterprises could
be divided into six groups: technical, commercial, financial, accounting, security and
administrative (or managerial). He focused on the managerial activity and propounded that
fundamental functions of any manager consists of planning, organizing, commanding,
coordinating and controlling. He emphasized that the process of management is the same at any
level of an organization and is common to all types of organizations.
He also presented 14 principles of management as general guidelines for management practice.
They dealt with division of work, authority and responsibility, discipline, unity of command,
unity of direction, and subordination of individual interest to general interest, remuneration,

6
centralization, scalar chain, order, equity, and stability of tenure of personnel, initiative and esprit
de corps. Apart from a list of basic management principles for achieving good organization and
dealing with the numerous facets of managing an organization, he laid tremendous emphasis on
logic, rationality and consistency. Taylor worked from the bottom of the hierarchy upward,
whereas Fayol worked from the apex downwards, with ‘management centered’ philosophy.
The 14 principles of management are discussed below:
1. Authority and Responsibility: The right to give orders/ issue commands and the power to
extract obedience. Responsibility is the accountability because of his/ her authority hold. There
should be a balanced responsibility for this function.
2. Specialization or Division of labor: Specialization allows individuals to build up experience
and the continuous improvement in skills. It gives way to higher productivity and efficiency
3. Discipline: Members in an organization need to respect the rules and agreements that govern
the organization. The workers should be obedient and respectful of the organization. The
management should provide good leadership. There should be no slacking, bending of rules
4. Unity of command: Employees should receive orders from one superior. There should not
beany conflicting lines of command.
5. Unity of direction: Those operations within the organization that have the same objective
should be directed by only one manager using one plan. This is to mean, People engaged in the
same kind of activities must have the same objectives in a single Plan. This is essential to ensure
unity and coordination in the enterprise
6. Subordination of Individual Interests to the organization interest or common goal: At
any circumstance or condition the organization interest should precede the individual interest.
When at work, only things related to work should be pursued or thought about.
7. Remuneration: The compensation of the company for the employees should designed by
considering various factors such as the living conditions of employees, business conditions, the
overall performance of the firm and the performance of employee. Employees receive fair payment for
services, not what the company can get away with.
8. Centralization: It is the degree to which decisions and more authorities are retained on the
hands of upper. Decreasing the role of subordinates in decision making is centralization;
increasing their role in decentralization. Fayol believed that managers should retain final
responsibility, but should at the same time give their subordinates enough authority to dotheir
jobs properly. The problem is to find the proper degree of centralization in each case.
9. Scalar of chain (chain of command): there should be a clear and unbroken line of authority
that runs from the top of the organization to the bottom or foot of the organization - A hierarchy is
necessary for the unity of direction. It refers to the formal chain of command running from top to
bottom of the organization. But it should not be over-stretched or consist of too many levels
10. Order: There should have a place for everything everyone in an organization’s setting. There
is a prescribed place for human and other resources in an organization. Social as well as material
order is necessary. People, in particular, should be in the jobs or positions they are most suited to.
11. Equity: Management should be fairly, friendly and kindly treated employees. In a running
business a combination of kindliness and justice is needed. Treating employees well isimportant
to achieve equity.
12. Stability of Tenure of Personnel: Employees work better if job security and career progress
are assured to them. An insecure tenure and a high rate of employee turnover will affect the

7
organization adversely. Higher rate of turnover of employees should be reduced by creating
conducive working environment and motivating employees (providing incentives).
13. Initiative: Allowing all personal to show their initiative in some way is a source of strength
for the organization. The organization or manager should provide a freedom of opportunity to
employees to express their idea, feelings, and to tell suggestions and feedbacks; and invent new
techniques i.e. important to do their tasks.
14. Esprit-de-corps: States that “Unity is strength”. It is harmony and
cohesion/consistency/commonality among personnel and it is sense of “team work”. It's a great
source of strength in the organization. Fayol stated that for promoting esprit de corps, the
principle of unity of command should be observed along with teamwork, avoiding the dangers of
divide and rule.

Chester Barnard: who held a number of important public service posts including President
of New Jersey Bell Telephone, has significantly influenced the theory and practice of
management for nearly half a century through his ideas expressed in his classic book
‘thefunctions of the executive’. He believed that the most important function of a manager is to
promote cooperative effort toward goals of the organization. Cooperation depends on effective
communication and a balance between rewards to, and contributions by, each employee.
Colonel L Urwick: was a distinguished executive and management consultant in U.K. He wrote a
book entitled ‘the elements of administration’ in which he tried to assemble the concepts and
principles of Taylor, Fayol, Mooney, Railey and other early management theorists.
Harold Koontz and Cyril O’Donnell: Inspired by Fayol, Harold Koontz and Cyril O’Donnell
propounded a new school of thought known as the management process school. They believe
that management is a dynamic process of performing the functions of planning, organizing,
staffing, directing and controlling. These functions and the principles, on which they are based,
are believed to have general and universal applicability. Managers perform the same functions
irrespective of their levels and the difference, if any, will be in the degree of complexity. These
functions are applicable to all organizations wherever group effort is involved and the
management theory is not culture bound. In other words these functions are all pervasive. For the
same reason the management process approach is also called the universal approach.
Assessing the Administrative Management / Classical Organization Theory
The classical administrative management theory focuses on managers and their actions rather
than an overall structure or work. Like scientific management, administrative management is
oriented toward increasing production but in different way at higher level. Today we tend to
avoid thinking in terms of universal principles, rather in terms of unique demands of each
situation. Principles are essential to the practice of management, if they provide flexibility to
make situational adaptations.

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2.2.3. BUREAUCRATIC MANAGEMENT THEORY
Weber was a sociologist who felt responsibility to improve organizational performance. As an
advocate of bureaucratic organization, he was concerned on how the overall structure of an
organization influences managerial effectiveness. Thus, the focus of bureaucratic management is
on improving organizational structure. An organization's structure consists of its positions and
their relationship, including such factors as organizational objectives, policies, procedures and
operating systems.

For the bureaucratic theory the source of power is the rational-legal authority (the right to
exercise authority based on position), that is where acceptance arises out of the office or position
of the person in authority as bounded by the rules and procedures of the organization.

A. Weber's bureaucratic management is characterized by:

1. Formal system of rules: formal guidelines for the behavior of all employees while they
are on the job. Considered positively, rules can help provide discipline in an organization.
Adherence to the rules ensures uniformity of procedures and operations and helps to
maintain organizational stability. It results in consistency in behavior.

2. Impersonality: maintaining impersonal relationship between organizational members,

reliance on rules and evaluation employees according to these rules and objective data.

3. Vertical Structure: ranks jobs according to the amount of power and authority given to
each position within the organization. It makes clear to each employee exactly where
he or she stands in relation to every other employee.

4. Division of labor: the process of dividing duties into simpler, more specialized tasks to
promote efficiency.

5. Authority structure: determines the rights to make decisions of varying importance at

different levels within the organization.

6. Life-long career commitment: the job security is guaranteed as long as the employee is
technically qualified and performs satisfactorily. It ensures educational and experience
based employment and promotion. Bureaucratic organizations, such as the civil service,
often relay on the results of written and oral exams, amount of formal education and
previous work experience to determine management rank.

7. Rationality:running the origination logically and scientifically.

8. Written records: The successful and continuous operation depends to a large extent up
on written records. It is relatively continuous in operation.

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 Advantages of Bureaucracy

a) Since rules and procedures are applicable to all, making the management process easier
to implement.

b) The overlapping and conflicting of job duties are eliminated.

c) Hiring and promotions are based on merit and expertise.

d) The division of labor makes the workers specialists.

e) The organization continues, even if the individuals leave position.

Disadvantage/drawbacks of Bureaucracy

a) There is too much red-tape and paper work

b) Excessive adherence to the rules and regulations. Employees are treated like machines
and not like human beiges.

c) Employees become resistant to change and new ideas because they are bounded by
formal rules.

d) It overlooked the impact or influence of behavioral factors and the role of informal
organization over formal organization

Generally the expected benefits of bureaucratic management are efficiency and consistency. A
bureaucracy functions best when many routines tasks need to be done. Bureaucratic management
is most appropriate for routine organizational activities where productivity is the major objective.
But it is not appropriate for the highly flexible organization which faces many non-routine
activities where creativity and innovations are important. In the dynamic society the innovative,
creative organization is becoming the rule rather than the exception.

B. Critiques on the classical theories and principles of organization and management

1. They regarded the human resources as an inert object (instrument). They gave inadequate
attention to human factors: rather, they gave prior concern for efficiency and productivity.
They did not deal with the informal or social relation ships and psychological aspects of
work. They did not deal with the informal or social relation ships and psychological
aspects of work. They emphasized with formal aspect of the organization.

2. Classical management theory concentrated on internal aspects of management like work

measurement, efficiency and effective organization structure. It disregarded the influence
of external environment on internal organizations.

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Contributions of Classical Management Theory
▪ Viewed management as a profession that can be trained and developed
▪ Emphasize the broad policy aspects of top level managers
▪ Promote efficient performance of routine organizational activities
▪ Eliminates subjective judgment by employees and management and
▪ Emphasize on position rather than the person
Limitations of Classical Management Theory

▪ Universal prescriptions need qualifications for environmental, technological and personal

actors
▪ Limited organizational flexibility and slow decision making
▪ Ignores the importance of people and interpersonal relationships
▪ Accumulation of power can lead to authoritarian management
▪ Rules may become ends by themselves
▪ Difficult to dismantle once established

2.3. THE HUMAN RELATIONS MOVEMENT

The term human-relation refers to the manner in which managers interact with subordinates. To
develop good relations, followers of this approach believed, managers must know why their
subordinates behave as they do and what psychological and social factors influence. While
scientific management concentrated on the physical environment of the job, human relations
concentrated on the social environment.
Members of the human relations movement, unsubstantiated by research, uniformly believed in
the importance of employee satisfaction – a satisfied worker was believed to be a productive
worker. For the most part, the people associated with this movement – Abraham Maslow and
Douglas McGregor – were individuals whose views were shaped more by their personal
philosophies than by substantive research evidence. On the other hand, some OB researchers
relied on the scientific method for the study of organizational behavior. These behavioral science
theorists engaged in objective research of human behavior in organizations. They carefully
attempted to keep their personal beliefs out of their work. They sought to develop rigorous
research designs that could be replicated by other behavioral scientists. In so doing, they hoped
to build a science of organizational behavior. They included such names as Fiedler, Vroom,
Herzberg, Locke, McClelland and Hackman.
How do today’s managers use the behavioral approach? The behavioral approach has largely
shaped today’s organizations. From the way managers design motivating jobs, to the way they
work with employee teams, to the way they use open communication, we can see elements of the
behavioral approach. Much of what the early OB advocates proposed, and the conclusions from
the Hawthorne Studies, provided the foundation for our current theories of motivation, leadership,
group behavior and development.

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2.3.1. The behavioral management theory

The proponents of behavioral school recognized employees as individuals with concrete human
needs, as part of work groups, and as members of a large society. Employees are assets that can
be developed not nameless robots expected to follow orders blindly.

The different theorists who had concern for people in the work environment organizations are
given below.

a. Robert Own (1771-1858)

He is considered as the father of modern personnel management. He asserted that the quality
and quantity of workers' out put were influenced by conditions both on and off the job.

b. George Elton Mayo (1880-1949)

Mayo and his associates were primarily concerned with the link between the psychological
aspects of work and productivity, or more specifically the effect of working conditions on
productivity.

The prominent work of Mayo is the Hawthorne (1924-1933) plant experiment conducted in
Western Electric Company near Chicago.

The research was carried in three phases:

Phase one: Relation between productivity of labor and physical working environment:

Here an increase in the intensity of light was made on a certain work group. However, the degree
of influence of the change of the physical-working environment on productivity was not much
strong.

Phase two: Relationship between productivity of labor and the individual participant's attitude at
his/here work. In this new phase, a small group of workers was placed in a separate placed and a
number of variables were changed: wages increased rest periods of varying lengths were
introduced, the work day and work week were shortened. The groups were increased, rest
periods of varying lengths were introduced, and the work day and work week were shortened.
The groups were also allowed to choose their own rest periods and to have a say in the suggested
changes. Again results were not clear. Then, it was concluded that financial incentives were not
causing the productivity improvements.

Phase three: Relation between productivity of labor and small informal group.

The interaction of small informal groups and the collective attitude of these groups and
individuals toward the job were observed. It was recognized that the cognitive style and value
judgment of an employee is determined by his/her interaction with other members. It was

12
concluded that, if the existence of the small informal groups and their interest is recognized it
would result good organizational performance. The above studies heightened management's
awareness of the social needs of workers and showed how an organization's social environment
influenced productivity.

Finally, the conclusions of Mayo and his Associates were:

1. Employees are essentially social beings not merely natural economic beings.

2. As social beings, employees are members of groups. Thus, managers should always
relate to individuals with full awareness of the nature of groups and their influence on
individual behavior.

3. Managers using good human relations will achieve productivity.

c. Abraham Maslow
A humanistic, psychologist, teacher and practicing manager developed a need-based theory of
motivation. Maslow's theory is now considered central to understanding human motivations and
behavior.

In 1943, in an article for psychological Review-"A theory of human motivation," Maslow

identified and analyzed five basic needs which he believed underlay all human behavior.

These needs relate to:

a) Physiology-the need for food water, air and sex.

b) Security-the need for safety

c) Social or affiliation-the need for friendship, interaction and love.

d) Esteem-the need to be respected and to get recognition

e) Self-actualization-the ability to reach one's potentials

Maslow's theory is based on the following:

1. Only unsatisfied need can influence behavior: a satisfied need is not a motivator.

2. a person's needs are arranged in a priority order of importance

3. A person will at least minimally satisfy each level of need before feeling the need at
the next level

4. If need satisfaction is not maintained at any level, the unsatisfied need will become a
priority once again. For example, for a person who is presently feeling social needs,

13
 safety will become a priority once again if he or she is fired. Abraham Maslow's
hierarchy of human needs (Figure)

d. Douglas McGregor
In his 1960 publication, "The Human Side of Enterprise," McGregor explained that all earlier
managers operated from one or two basic assumptions about human behavior: Theory X and
Theory Y.

- The first theory (Theory-X), viewed workers as being lazy and needing to be coerced,
controlled and directed.

- The second (Theory-Y) described people as McGregor thought them to be:

responsible, willing to learn and given the proper initiatives, inherently motivated to
exercise ingenuity and creativity.

McGregor told managers that if they give employees a chance to contribute and to take control
and responsibility, they would do so (McGregor 1960). The focus of behavioral approach
extends from the study of individual behavior on the one hand, to the study of large groups and
organizations on the other. Three of the broadly based areas of interest for behavioral scientists
are individual behavior, group behavior and organization development.

The behavioral approach uses the concepts of psychology, sociology, anthropology, and other
behavioral theories to assist managers in understanding human behavior in the work environment.
The emphasis of the behavioral approach focuses on the interrelationships between people, work,
and an organization. It also concentrates on such topic as motivation communication, leadership
and work group formation which can assist managers with the people aspects of their jobs.

2.4. THE MODERN ERA

Beginning from the World War II and some time in 1960’s modern management theorists have
tried to integrate the findings of the scientific, administrative, and human relation movements to
solve war time problems. Under the modern approach, we have the following streams:
2.4.1. The Management Science Approach
The management scientists, led by operations researchers and systems analysts see management as
“a system of mathematical models and processes”. They hold that since managing a logical and
rational process, it can be expressed in terms of mathematical relationships and models. New
mathematical and statistical tools are applied in the field of management. Particularly, it can be
employed in decision making with respect to complex problems such as resource allocation,
replacement of capital equipment, inventory control, production scheduling, and quality control
and so on. This will lend exactness to management process and substitute certainty for guesswork,
knowledge for judgment, hard facts for experience. Some of the quantitative techniques suggested

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are liner programming, critical path method, economic order quantity, queuing theory, probability
theory and so forth.
2.4.2. Systems Approach
In this approach an organization was viewed as organic and open system which is composed of
interacting and interdependent parts, called subsystems. From the systems perspective,
management involves managing and solving problems in each part of the organization but doing
so with the understanding that actions taken in one part of the organization affect other parts as
well. Each part tightly linked to other organizational parts; no single part of an organization exists
and operates in isolation from the others. Thus, in solving problems, managers must view the
organization as a dynamic whole and try to anticipate the unintended as well as the intended
impacts of their decisions.

The systems approach views the elements of an organization as interconnected. The approach also
views the organization as linked to its environment. Organizational effectiveness, even survival,
depends on the organization’s interaction with its environment. A system has the following
features:
System: a set of interrelated parts that work together to achieve common objective. A company, a
university, a human body are examples of a system.
Subsystems: set of related parts those works together to achieve a common objective are known
as subsystems or components.
Open and closed system: open systems interact freely with their environment. Closed systems,
on the contrary, do not interact with their environment.
Input- transformation process-output system: an open system receives inputs from its
environment which it transforms into outputs.
Synergy: this shows the fact that “the whole is greater than the sum of its parts”.
System boundary: is the boundary that separates each system from its environment. It is rigid in
closed system and flexible in open system.
Feedback: the part of system control in which the results of actions are returned to the individual,
allowing work procedure to be analyzed.

2.4.3. The Contingency Approach

The systems approach forces managers to recognize that organizations are systems made up of
interdependent parts and that the change in one part affects other parts. It seeks to identify the
characteristics of jobs, people and organization and allow managers to see the interdependence
among the various segments or units.

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Contingency/situational management theory states that management actions and leadership styles
should be dependent up on the circumstance/situation confronting the manager. The contingency
approach can be summarized as “it all depends” device. Right and proper conduct under one set of
circumstances may totally fail under another set. Since no two problems possess identical details,
neither should any solution. Several solutions and approaches may be possible and might yield
equally good results. Supporters of this theory would acknowledge that many roads lead to a city
from several direction; they would also stress that the route that appears the shortest might not be
the best choice if it is undergoing repairs.
In short, this theory emphasizes that there is no one best of performing any managerial task and it
all depends on the confronting the managers. This theory tells managers look to their experience,
the past and consider many options before choosing alternatives. It also tells that intelligent choice
comes only adequate preliminary research.
2.5. The Emerging Trends in Management
2.5.1. Total Quality Management (TQM)

It is an integrated organizational effort designed to improve quality at every level. The definition
of quality depends on the role of the people defining it. Most consumers have a difficult time
defining quality, but they know it when they see it. Today, there is no single universal definition
of quality. Some people view quality as “performance to standards.”Others view it as “meeting
the customer’s needs” or “satisfying the customer.” Let’s look at some of the more common
definitions of quality.
Conformance to specifications measures how well the product or service meets the targets and
tolerances determined by its designers.

Fitness for use focuses on how well the product performs its intended function or use.

Value for price paid is a definition of quality that consumers often use for product or service
usefulness. This is the only definition that combines economics with consumer criteria; it assumes
that the definition of quality is price sensitive.

Support services provided are often how the quality of a product or service is judged. Quality
does not apply only to the product or service itself; it also applies to the people, processes, and
organizational environment associated with it.

Psychological criteria are a subjective definition that focuses on the judgmental evaluation of
what constitutes product or service quality. Different factors contribute to the evaluation, such as
the atmosphere of the environment or the perceived prestige of the product.

The Philosophy of TQM

What characterizes TQM is the focus on identifying root causes of quality problems and
correcting them at the source, as opposed to inspecting the product after it has been made. Not
only does TQM encompass the entire organization, but it stresses that quality is customer driven.
TQM attempts to embed quality in every aspect of the organization. It is concerned with technical
aspects of quality as well as the involvement of people in quality, such as customers, company

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employees, and suppliers. Here we look at the specific concepts that make up the philosophy of
TQM.

Customer Focus
The first, and overriding, feature of TQM is the company’s focus on its customers. Quality is
defined as meeting or exceeding customer expectations. The goal is to first identify and then meet
customer needs. TQM recognizes that a perfectly produced product has little value if it is not what
the customer wants. Therefore, we can say that quality is customer driven.

Continuous Improvement
Another concept of the TQM philosophy is the focus on continuous improvement. Traditional
systems operated on the assumption that once a company achieved a certain level of quality, it
was successful and needed no further improvements.

The Plan–Do–Study–Act Cycle The plan–do–study–act (PDSA) cycle describes the activities a
company needs to perform in order to incorporate continuous improvement in its operation. This
cycle, shown in Figure 5-6 is also referred to as the Shewhart cycle or the Deming wheel. The
circular nature of this cycle shows that continuous improvement is a never-ending process. Let’s
look at the specific steps in the cycle.

• Plan The first step in the PDSA cycle is to plan. Managers must evaluate the current process
and make plans based on any problems they find. They need to document all current procedures,
collect data, and identify problems. This information should then be studied and used to develop a
plan for improvement as well as specific measures to evaluate performance.

• Do The next step in the cycle is implementing the plan (do). During the implementation process
managers should document all changes made and collect data for evaluation.
• Study The third step is to study the data collected in the previous phase. The data are evaluated
to see whether the plan is achieving the goals established in the plan phase.

• Act The last phase of the cycle is to act on the basis of the results of the first three phases. The
best way to accomplish this is to communicate the results to other members in the company and
then implement the new procedure if it has been successful. Note that this is a cycle; the next step
is to plan again. After we have acted, we need to continue evaluating the process, planning, and
repeating the cycle again.

Benchmarking Another way companies implement continuous improvement is by studying

business practices of companies considered “best in class.” This is called benchmarking. The
ability to learn and study how others do things is an important part of continuous improvement.
The benchmark company does not have to be in the same business, as long as it excels at
something that the company doing the study wishes to emulate. For example, many companies
have used Lands’ End to benchmark catalog distribution and order filling, because Lands’ End is
considered a leader in this area. Similarly, many companies have used American Express to
benchmark conflict resolution.

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Employee Empowerment
Part of the TQM philosophy is to empower all employees to seek out quality problems and correct
them. With the old concept of quality, employees were afraid to identify problems for fear that
they would be reprimanded. Often poor quality was passed on to someone else, in order to make it
“someone else’s problem.” The new concept of quality, TQM, provides incentives for employees
to identify quality problems. Employees are rewarded for uncovering quality problems, not
punished. In TQM, the role of employees is very different from what it was in traditional systems.
Workers are empowered to make decisions relative to quality in the production process. They are
considered a vital element of the effort to achieve high quality. Their contributions are highly
valued, and their suggestions are implemented. In order to perform this function, employees are
given continual and extensive training in quality measurement tools.

To further stress the role of employees in quality, TQM differentiates between external and
internal customers. External customers are those that purchase the company’s goods and services.
Internal customers are employees of the organization who receive goods or services from others
in the company. For example, the packaging department of an organization is an internal customer
of the assembly department. Just as a defective item would not be passed to an external customer,
a defective item should not be passed to an internal customer.

Team Approach TQM stresses that quality is an organizational effort. To facilitate the solving of
quality problems, it places great emphasis on teamwork. The use of teams is based on the old
adage that “two heads are better than one.”Using techniques such as brainstorming, discussion,
and quality control tools, teams work regularly to correct problems. The contributions of teams
are considered vital to the success of the company. For this reason, companies set aside time in
the workday for team meetings. Teams vary in their degree of structure and formality, and
different types of teams solve different types of problems. One of the most common types of
teams is the quality circle, a team of volunteer production employees and their supervisors whose
purpose is to solve quality problems. The circle is usually composed of eight to ten members, and
decisions are made through group consensus. The teams usually meet weekly during work hours
in a place designated for this purpose. They follow a preset process for analyzing and solving
quality problems. Open discussion is promoted, and criticism is not allowed. Although the
functioning of quality circles is friendly and casual, it is serious business. Quality circles are not
mere “gab sessions.” Rather, they do important work for the company and have been very
successful in many firms.

2.5.2. Six- Sigma

Six Sigma is an organized and systematic method for strategic process improvement and new
product and service development that relies on statistical methods and the scientific method to
make dramatic reductions in customer defined defect rates. This is an approach to quality
improvement based on the statistical work of Joseph Juran, one of two American pioneers of
quality management in Japan. Sigma is a Greek letter used in mathematics to denote standard
deviation, a statistical measure of the extent to which a series of numbers or readings deviates
from its mean. One Sigma indicates a wide scattering of the readings. If the mean is the required
quality standard of a particular process or product, then One Sigma quality is not very good. The
higher the number, the closer the readings come to total perfection. At the Six Sigma level, there
are only 3.4 defects per million.

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2.5.3 Theory Z
Theory Z was introduced by William Ouchi in the 1980s. Theory Z combined common
management ideas from Japan and the United States with the purpose of increasing the
employees’ motivation and loyalty. Theory Z built on and expanded MacGregor’s Theory X and
Theory Y.

Theory Y managers believed that employees were self-motivated and did not need the constant
hand-holding of a micromanager. Managers believed that the employees would derive fulfillment
from the work itself and that would push them to deliver better results.

2.5.4. Business Process Reengineering (BPR)

Business Process Reengineering means not only change – but dramatic change. What constitutes
dramatic change is the overhaul of organizational structures, management systems, employee
responsibilities and performance measurements, incentive systems, skills development, and the
use of information technology. Business Process Reengineering (BPR) can potentially impact
every aspect of how we conduct business today. Change on this scale can cause results ranging
from enviable success to complete failure.

Successful BPR can result in enormous reductions in cost or cycle time. It can also potentially
create substantial improvements in quality, customer service, or other business objectives. The
promise of BPR is not empty -- it can actually produce revolutionary improvements for
business operations. Reengineering can help an aggressive company to stay on top, or transform
an organization on the verge of bankruptcy into an effective competitor. The successes have
spawned international interest, and major reengineering efforts are now being conducted around
the world.

On the other hand, BPR projects can fail to meet the inherently high expectations of reengineering.
Recent surveys estimate the percentage of BPR failures to be as high as 70%. Some organizations
have put forth extensive BPR efforts only to achieve marginal, or even negligible, benefits. Others
have succeeded only in destroying the morale and momentum built up over the lifetime of the
organization. These failures indicate that reengineering involves a great deal of risk. Even so,
many companies are willing to take that risk because the rewards can be astounding.

Many unsuccessful BPR attempts may have been due to the confusion surrounding BPR, and how
it should be performed. Organizations were well aware that changes needed to be made, but did
not know which areas to change or how to change them. As a result, process reengineering is a
management concept that has been formed by trial and error -- or in other words practical
experience. As more and more businesses reengineer their processes, knowledge of what caused
the successes or failures is becoming apparent.

In 1990 and again in 1993, some definitive works were put forth by Dr. Michael Hammer, James
Champy, and Thomas Davenport. They were asking the questions of, "What worked and why?"
along with "What didn’t work and why not?" They discovered that most of the companies that

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had succeeded in changing their processes had used a similar set of tools and tactics. They called
this set of procedures Business Reengineering.

Business Reengineering is the fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in critical, contemporary measures of performance, such as
cost, quality, service, and speed."
Dr. Michael Hammer

Fundamental rethink of Radical redesign of business

business processes processes

Dramatic & sustainable

improvements in

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