CHAPTER 2.

Management Yesterday and Today

Historical Background of Management: Ancient Management
Egypt and China
 Even in ancient times, large-scale projects required careful planning, organization, and
coordination.
 The Egyptians demonstrated early management practices in constructing the pyramids, which
required thousands of workers, precise division of tasks, and strong leadership to complete.
 Similarly, in China, the building of the Great Wall showed how managing massive manpower and
resources was possible through structured organization, supervision, and record-keeping.
 These examples highlight that basic management principles—planning, organizing, and
controlling—were already applied in ancient civilizations.
Venetians
 The Venetians were known for their naval power. They created an early form of assembly line
production by building warships on floating platforms.
 Workers specialized in specific tasks, and ships moved along the line until completed. This shows
an early understanding of efficiency, specialization, and systematic workflow in operations.
Adam Smith (1776)
 Considered the "Father of Modern Economics," Adam Smith published The Wealth of Nations.
 He introduced the idea of the division of labor (job specialization), emphasizing that productivity
improves when workers focus on specific, repetitive tasks rather than handling multiple duties.
 His insights became a foundation for later management theories and industrial practices.
Industrial Revolution (18th–19th Century)
 The Industrial Revolution transformed economies by replacing human labor with machine power.
 This led to the rise of large-scale factories and organizations, which required formal systems of
management to handle production, workers, and resources.
 Managers became essential in ensuring efficiency, coordination, and control in these growing
industries.

Exhibit 2–1 Development of Major Management Theories

This progression shows how management theory evolved from mechanistic views focused on efficiency
to more sophisticated understandings that incorporate human behavior, systems thinking, and situational
factors. Each approach built upon previous insights while addressing their limitations, creating the diverse
toolkit modern managers use today.
Major Approaches to Management
1. Scientific Management
Frederick Winslow Taylor – The Father of Scientific Management
 Frederick Winslow Taylor (1856–1915) is widely recognized as the “Father of Scientific
Management.” He revolutionized management practices during the early 20th century by
introducing a systematic, scientific approach to improving efficiency in the workplace.
 In 1911, Taylor published his landmark book, The Principles of Scientific Management, which
became the foundation of modern management thinking.
Key Ideas of Taylor’s Scientific Management
One Best Way
 Taylor believed every job could be studied scientifically to determine the most efficient method
of performing it.
 Instead of relying on “rule-of-thumb” methods or traditions, managers should use time-and-
motion studies to analyze tasks.
 Goal: Eliminate wasted effort and maximize productivity.
Right Person, Right Tools
 Taylor emphasized matching workers to jobs based on their skills and abilities.
 Workers should also be provided with the proper tools and equipment to perform tasks
efficiently.
Standardization of Work
 Once the best method was identified, it should be standardized so that all workers performed the
task the same way.
 This ensured consistency, quality, and reduced errors.
Economic Incentives
 Taylor argued that workers are primarily motivated by money.
 He introduced the concept of differential piece-rate pay, where workers who exceeded the
standard output earned higher wages.
 This system encouraged higher performance and rewarded efficiency.

2. General Administrative Theory

General Administrative Theory
 Unlike scientific management, which focused on improving individual worker efficiency, General
Administrative Theory looked at the organization as a whole. It emphasized the overall structure
and the principles that guide effective management.
Henri Fayol (1841–1925)
 Known as the “Father of Modern Management”, Henri Fayol believed that management was a
separate function within organizations, distinct from technical tasks like engineering, finance, or
production.
 He argued that management principles could be applied universally to all organizations —
whether business, government, or military.
Max Weber (1864–1920)
 A German sociologist, Weber developed a theory of management called bureaucracy — not in
the negative sense we think of today, but as an ideal type of organization.
 He believed that authority in organizations should be based on rational and legal principles, not
favoritism or personal connections.
Key Features of Bureaucracy:
 Rationality – decisions should be based on rules and logic, not emotions.
 Predictability – clear procedures ensure consistency.
 Impersonality – rules apply equally to everyone, avoiding favoritism.
 Technical Competence – hiring and promotion should be based on skills and qualifications, not
personal ties.
 Authoritarianism (Legal Authority) – managers hold authority because of their position in the
organization, not because of personal wealth, charisma, or power.

Fayol’s 14 Principles of Management

1. Division of Work
 Specialization improves efficiency and productivity.
 Example: In a bakery, one person handles mixing, another bakes, and another decorates
cakes — instead of one person doing everything.
2. Authority
 Managers must have the right to give orders, but authority comes with responsibility.
 Example: A supervisor can assign tasks but is also responsible for the team’s output.
3. Discipline
 Employees must follow rules and agreements, and managers must enforce discipline fairly.
 Example: Consistently following attendance policies and company procedures.
4. Unity of Command
 Each employee should report to only one manager, to avoid confusion and conflict.
 Example: A teacher reports only to the school principal, not to multiple supervisors.
5. Unity of Direction
 Activities with the same objective should be directed by one manager under one plan.
 Example: All marketing activities (advertising, social media, promotions) should be guided by
the marketing manager.
6. Subordination of Individual Interests to the General Interest
 The organization’s goals must come before personal interests.
 Example: A nurse may prefer shorter shifts, but must follow hospital scheduling to ensure
patient care.
7. Remuneration
 Workers must be fairly paid for their services to maintain satisfaction and motivation.
 Example: Offering fair salaries, bonuses, or performance-based pay.
8. Centralization
 The degree to which decision-making is concentrated at the top versus delegated to lower
levels.
 Example: In small businesses, decisions are centralized with the owner; in large corporations,
authority is decentralized to managers.

9. Scalar Chain
 A clear line of authority should exist from the top to the bottom of the organization (hierarchy).
 Example: CEO → Manager → Supervisor → Worker.
 10. Order
 Resources (people, equipment, materials) should be well-organized and in the right place.
 Example: Tools in a workshop should be stored in proper locations for quick access.
11. Equity
 Managers should be fair and kind, ensuring equal treatment of employees.
 Example: Promotions are based on performance, not favoritism.
12. Stability of Tenure of Personnel
 High employee turnover is inefficient; stability promotes loyalty and productivity.
 Example: Providing long-term contracts and career growth opportunities.
13. Initiative
 Employees should be encouraged to take initiative, contribute ideas, and act independently
where appropriate.
 Example: A staff member suggests a new customer service process, and management
adopts it.
14. Esprit de Corps (Team Spirit)
 Promoting teamwork, unity, and harmony among employees leads to greater strength and
success.
 Example: Team-building activities, open communication, and celebrating group
achievements.

Exhibit 2–4. Weber’s Ideal Bureaucracy

Core Characteristics
1. Division of Labor forms the backbone of Weber's bureaucratic model. Work is systematically
divided into specialized roles where each position has clearly defined responsibilities and
required competencies. This specialization allows organizations to harness expertise and
increase efficiency by having individuals focus on specific tasks they can master.
2. Authority Hierarchy establishes a clear chain of command with well-defined levels of authority.
Each position is subordinate to higher positions and superior to lower ones, creating a pyramid-
like structure. This hierarchy ensures coordination, accountability, and clear decision-making
pathways throughout the organization.
3. Formal Rules and Regulations govern all organizational activities through written policies,
procedures, and standards. These rules provide consistency, predictability, and fairness in how
the organization operates. They also serve as institutional memory, ensuring that operations
continue smoothly regardless of personnel changes.
 4. Impersonality requires that organizational relationships and decisions be based on official roles
rather than personal relationships or individual characteristics. This principle aims to eliminate
favoritism, nepotism, and arbitrary decision-making, promoting fairness and objectivity in
organizational processes.
5. Career Orientation treats management positions as professional careers rather than temporary
assignments or personal property. Managers are career professionals who advance based on
merit and experience, creating stability and expertise within the organizational leadership.
6. Formal Selection emphasizes hiring and promotion based on technical qualifications, education,
and demonstrated competence rather than personal connections or political considerations. This
merit-based approach aims to ensure that the most capable individuals occupy organizational
positions.

3. Quantitative Management
 Emerged during World War II when complex military problems required advanced mathematical
and statistical tools.
 Focus: Applying quantitative techniques (mathematics, models, data) to decision-making and
resource allocation.
 Example: Airlines use quantitative methods to schedule flights, optimize ticket pricing, and reduce
fuel costs.
4. Organizational Behavior (OB)
 Organizational Behavior (OB) is the study of how people behave at work — individually and in
groups. It focuses on understanding employee motivation, attitudes, leadership,
communication, teamwork, and job satisfaction.
 The idea is simple: since people are the most valuable asset of an organization, managers
must understand human behavior to manage effectively.
Early OB Advocates
Robert Owen (1771–1858)
 A social reformer who emphasized the importance of improving working conditions.
 Believed that treating workers well (better housing, shorter hours, no child labor) would result in
higher productivity.
 He is often called a pioneer of human resource management.
Hugo Munsterberg (1863–1916)
 Known as the father of industrial psychology.
 Applied psychology to management by studying how to select workers, match jobs to skills,
and motivate employees.
 Example: Developed tests to measure employee abilities for specific tasks.
Mary Parker Follett (1868–1933)
 Called the “Mother of Modern Management.”
 Focused on the importance of coordination, teamwork, and participative decision-making.
 Believed managers and workers should collaborate rather than control each other.
 Advocated for resolving conflict through integration rather than domination.
Chester Barnard (1886–1961)
 Introduced the idea of organizations as social systems.
 Defined organizations as systems of cooperative activities that require good communication
and willingness to serve.
  Stressed the importance of leadership and the manager’s role in maintaining communication and
motivation.

The Hawthorne Studies (1927–1932)

The Hawthorne Studies were a landmark series of experiments conducted at the Western Electric
Hawthorne Works in Chicago. Originally designed to examine the relationship between physical working
conditions and worker productivity, the studies ultimately revealed important insights about human
behavior in organizations.
Experimental Findings
1. Unexpected Productivity Increases
 Researchers found that productivity rose even when working conditions were made less
favorable (e.g., reducing lighting levels or changing rest breaks).
 This indicated that factors beyond physical conditions influenced worker performance.
2. Limited Impact of Incentives
 Monetary incentives and formal reward systems had less influence on productivity than
expected.
 Workers’ attitudes, feelings of being observed, and social interactions played a larger role.
Research Conclusion
 The studies demonstrated that social norms, group standards, and employee attitudes strongly
influence individual work behavior.
 Workers were not just motivated by pay but also by a sense of belonging, recognition, and group
approval.
 This led to the identification of what became known as the “Hawthorne Effect”—the tendency of
people to change or improve their behavior simply because they are being observed.

5. Systems Approach
• System Defined
 A set of interrelated and interdependent parts arranged in a manner that produces a
unified whole.
• Basic Types of Systems
 Closed systems
 Are not influenced by and do not interact with their environment (all system input
and output is internal).
 Open systems
 Dynamically interact to their environments by taking in inputs and transforming
them into outputs that are distributed into their environments.

6. Contingency Approach
• Contingency Approach Defined
 Also sometimes called the situational approach.
 There is no one universally applicable set of management principles (rules) by which to
manage organizations.
 Organizations are individually different, face different situations (contingency variables),
and require different ways of managing.
  Belief: There is no one best way to manage; the best approach depends on the
situation.
 Managers must adapt their style and strategies to the environment, people, and problems
they face.
 Example: A manager may use an authoritative style during a crisis but a participative
style when encouraging innovation.

Popular Contingency Variables

In the Contingency Approach to management, the effectiveness of any management practice depends on
certain situational factors, known as contingency variables. These variables help explain why “one best
way” to manage does not exist.
Organization size
• As size increases, so do the problems of coordination. A small business may succeed
with informal communication and flexible roles, but a large corporation requires more
formal structures, policies, and systems to manage its many parts effectively.

Routineness of task technology

• Routine technologies require organizational structures, leadership styles, and control
systems that differ from those required by customized or nonroutine technologies.
• Tasks that are routine and repetitive (e.g., assembly line work) benefit from standardized
procedures, close supervision, and efficiency-focused structures.
• In contrast, nonroutine or customized tasks (e.g., research and development, design
work) require flexibility, creativity, and decentralized decision-making.
Environmental uncertainty
• What works best in a stable and predictable environment may be totally inappropriate in a
rapidly changing and unpredictable environment.
• In a stable environment, organizations can rely on formal rules, long-term planning, and
structured systems.
• In a dynamic and unpredictable environment (e.g., technology or fashion industries),
organizations must remain flexible, adaptive, and innovative to survive.
Individual differences
• Individuals differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and
expectations.
• Employees differ in personality, needs, and expectations.
• For example, some individuals prefer autonomy and opportunities for growth, while
others are more comfortable with structure and routine.
• Managers must adjust their leadership style to fit the individual characteristics of their
team members.
Conclusion

• The Contingency Approach reminds us that management practices must be adapted to

the situation. By considering variables such as organization size, task technology,
environment, and individual differences, managers can choose strategies that fit best
and lead to higher effectiveness.

Current Trends and Issues

1. Globalization- is one of the biggest trends in management, as businesses now operate beyond
national borders. Managers must think globally but act locally, balancing worldwide strategies with
local market needs.
Example: Apple sources raw materials from Africa, manufactures in China, designs in the U.S., and
sells worldwide. Manager must coordinate across continents to ensure smooth operations.
There are political and cultural challenges of operating in a global market:

Political and Cultural Challenges

Businesses face varying political systems, regulations, and cultural values. Misunderstanding local
customs or political climates can harm relationships and operations.
 Working with People from Different Cultures
Managers must develop cultural sensitivity and effective cross-cultural communication to lead
diverse teams and serve international customers.
 Coping with Anticapitalist Backlash
Some groups criticize globalization for increasing inequality and harming local economies.
Managers must address these criticisms by practicing corporate social responsibility and
sustainable business practices.
 Movement of Jobs to Low-Cost Labor Countries
Outsourcing and offshoring can reduce costs but may also lead to job losses in home countries,
raising ethical and political debates. Managers must balance cost savings with social
responsibility.
2. Ethics
With rising public scrutiny, ethical behavior has become central to business success.
 Increased Emphasis on Ethics Education
Colleges and universities are now integrating ethics into business and management programs,
preparing future leaders to face moral dilemmas responsibly.
 Codes of Ethics in Organizations
More companies are developing formal codes of ethics to guide employee behavior, prevent
misconduct, and promote integrity in decision-making. These codes also strengthen stakeholder
trust.
Conclusion
The current trends of globalization and ethics show that managers today must not only focus on
efficiency and profit but also on cultural awareness, social responsibility, and ethical behavior.
Successfully addressing these issues ensures both organizational growth and positive global impact.

A Process for Addressing Ethical Dilemmas

Ethical dilemmas arise when a person faces a situation in which they must choose between two or more
conflicting values, principles, or interests. This process provides a systematic way to evaluate and resolve
such dilemmas.
Step 1: What is the ethical dilemma?
 Clearly define the problem.
 Identify what makes the situation ethically challenging (e.g., conflict between honesty and loyalty,
profit vs. fairness).
Step 2: Who are the affected stakeholders?
  Determine who will be impacted by the decision (e.g., employees, customers, shareholders,
community, or society).
 Considering all stakeholders helps prevent biased or one-sided decisions.
Step 3: What personal, organizational, and external factors are important to my decision?
 Personal factors: your values, morals, and conscience.
 Organizational factors: company culture, policies, and code of ethics.
 External factors: laws, regulations, and societal expectations.
Step 4: What are possible alternatives?
 Brainstorm different courses of action.
 Consider both short-term and long-term consequences for each alternative.
Step 5: Make a decision and act on it.
 Choose the most ethical option after careful consideration.
 Take responsibility for the decision and ensure that it is implemented effectively.
Conclusion
 This step-by-step process ensures that ethical decisions are made thoughtfully, considering not
just personal interests but also organizational integrity and the well-being of stakeholders. It helps
managers act with fairness, responsibility, and accountability.

3. Workforce Diversity

 One of the most significant challenges and opportunities in modern management is workforce
diversity. Diversity refers to the variety of differences among people in an organization, including
gender, age, race, ethnicity, culture, abilities, and experiences.

Increasing Heterogeneity in the Workforce

 Workforces today are more diverse than ever before.

 Organizations employ people from different genders, minority groups, ethnic backgrounds, and
cultural traditions.

 This diversity enriches the workplace by bringing in fresh perspectives, creativity, and innovative
problem-solving but also requires managers to handle cultural differences and potential conflicts
effectively.

Aging Workforce

 Older employees who work longer and do not retire

 The increased costs of public and private benefits for older workers

 An increasing demand for products and services related to aging.

4. Entrepreneurship Defined

 The process of starting new businesses, generally in response to opportunities. Entrepreneurship

is the process of starting and managing new businesses, usually in response to opportunities
in the market. Entrepreneurs are individuals who identify gaps, create solutions, and take risks to
establish and grow organizations.
 Entrepreneurship process

a. Pursuit of Opportunities
 Entrepreneurs are opportunity-seekers. They identify unmet customer needs,
market gaps, or emerging trends and create businesses to address them.
 For example, digital platforms emerged as opportunities to connect buyers and
sellers globally.
b. Innovation
 At the heart of entrepreneurship is innovation—introducing new products,
services, or methods of doing business.
 Innovation gives organizations a competitive edge and helps them adapt to
changing environments.
c. Desire for Continual Growth
 Entrepreneurs aim not just to start a business but to expand and sustain it.
 This involves scaling operations, entering new markets, and continuously
improving to meet customer needs.

Conclusion

Entrepreneurship is a vital trend in today’s economy because it drives innovation, job

creation, and economic growth. Entrepreneurs transform opportunities into realities and ensure
that their organizations grow and remain competitive in a dynamic business environment.

5. E-Business (Electronic Business)

 The work performed by an organization using electronic linkages to its key constituencies. E-
business refers to the use of electronic linkages—especially the internet—to carry out the work
of an organization and connect with its key stakeholders, such as customers, suppliers,
employees, and partners. It extends beyond online sales to include communication, collaboration,
and internal business processes.
 E-commerce: the sales and marketing aspect of an e-business. E-commerce is a subset of e-
business, focusing specifically on the sales and marketing activities conducted online.
Examples include online shopping platforms, digital advertising, and mobile payment systems.

Categories of E-Businesses

 E-business enhanced organization- A traditional business that uses electronic tools to

improve efficiency and communication. Example: A retail store that allows customers to
check product availability online but still operates mainly offline.

 E-business enabled organization- Combines traditional operations with significant online

activities. Example: A bank that has physical branches but also provides online banking
services such as fund transfers, bill payments, and mobile apps.

 Total e-business organization- Operates entirely online with no physical business

presence. Example: Amazon, Netflix, or Shopee—companies that rely exclusively on
digital platforms to conduct their business.
E-Business Enhanced Organization (Blue box): These are traditional companies that have added
specific e-business units or departments to their existing structure. The core business remains
conventional, but they've created dedicated digital divisions to handle online activities like e-commerce,
digital marketing, or online customer service. This represents a partial adoption approach where digital
capabilities complement rather than transform the main business operations.

E-Business Enabled Organization (Green box): These organizations use e-business tools and
applications within their traditional framework. They've adopted digital technologies to improve efficiency
and capabilities - such as using enterprise software, customer relationship management systems, or
digital communication tools - but their fundamental business model and processes remain largely
traditional. The technology enables better performance of existing operations.

Total E-Business Organization (Red box): This represents the most comprehensive digital
transformation, where the organization's entire work processes revolve around the e-business model.
These companies are built from the ground up as digital entities, or have completely restructured their
operations to be primarily digital. Everything from customer interaction to internal processes to value
delivery is designed around digital platforms and methods.

The arrows show this as a progression or spectrum, where organizations can evolve from enhanced to
enabled to total e-business adoption, with each level representing deeper integration of digital
technologies into their core operations.

6. Learning Organization

 An organization that has developed the capacity to continuously learn, adapt, and
change.

• Knowledge Management

 The cultivation of a learning culture where organizational members systematically gather

and share knowledge with others in order to achieve better performance.
Learning Organization versus Traditional Organization

7. Quality Management

 A philosophy of management driven by continual improvement in the quality of work processes

and responding to customer needs and expectations
 Inspired by the total quality management (TQM) ideas of Deming and Juran
 Quality is not directly related to cost. Investing in better quality does not always mean higher
costs. In fact, improving quality often reduces costs by minimizing waste, errors, and rework.
 Poor quality results in lower productivity. Defective products, mistakes, or inefficient processes
waste time and resources. This leads to lower productivity and harms customer trust.

Quality Management is a management philosophy and practice that ensures products, services, and
processes consistently meet or exceed customer expectations. It is not just about controlling defects—it is
about building a culture of excellence, continuous improvement, and customer satisfaction
throughout the organization.

Key Characteristics of Quality Management

 Intense Focus on the Customer

o Customers are at the center of quality management.

o Every decision, process, and improvement is aimed at meeting customer needs and
increasing satisfaction.

 Concern for Continual Improvement

o Quality is never “finished.”

o Organizations must always look for ways to improve products, services, and processes.

 Process-Focused

o Instead of only checking final outputs, quality management emphasizes improving the
processes that create the outputs.

o Better processes lead to fewer errors and higher efficiency.

 Improvement in the Quality of Everything

 o Quality management is not limited to products—it also applies to services, systems,
communication, and even internal operations.

o Every aspect of the organization must aim for excellence.

 Accurate Measurement

o Data and facts guide decisions, not guesswork.

o Accurate measurement ensures managers can track performance, find problems, and
evaluate improvements.

 Empowerment of Employees

o Employees at all levels are given the responsibility and authority to identify problems and
suggest improvements.

o This creates ownership, motivation, and teamwork toward achieving quality goals.

 Conclusion

o Quality Management is a holistic approach where the entire organization works

together to deliver value to customers. By focusing on continuous improvement,
empowering employees, and relying on accurate measurement, organizations achieve
higher productivity, better customer satisfaction, and long-term success.