Management and Organization

A historical  perspective on management provides a context or environment in which to in- terpret current opportunities and problems. Studying history, however, doesn’t mean merely arranging events in chronological order. It means developing an understanding  of the impact of societal forces on organizations. Studying history is a way to achieve strategic thinking, see the big picture, and improve conceptual skills. Let’s start by examining how social, political, and economic forces have influenced organizations and the practice of management.

1. INFLUENTIAL  FORCES

Social forces refer to those aspects of a culture  that guide and influence relationships among people. What do people value? What do people need? What are the standards of behavior among people? These forces shape what is known  as the social contract,  which refers to the unwritten,  common rules and perceptions about relationships among people and between employees and management.

A significant  social force today is represented by the changing attitudes, ideas, and val- ues of Generation X and Generation Y employees.72 Generation X employees, those now in their 30s and 40s, have had a profound  impact  on the workplace, and Generation Y workers (sometimes called Nexters) may have an even greater impact. These young work- ers, the most-educated generation in the history of the United  States, grew up technologi- cally adept and globally conscious.

Unlike many workers of the past, they don’t hesitate to question their superiors and challenge the status quo. They want a work environment that is challenging and support- ive, with access to cutting-edge technology, opportunities to learn and further their careers and personal goals, and the power to make substantive decisions and changes in the work-place. In addition, Gen X and Gen Y workers  have prompted  a growing  emphasis on work/life balance, reflected in trends  such as telecommuting,  flextime, shared jobs, and organization-sponsored sabbaticals.

Political forces refers to the influence of political and legal institutions  on people and organizations. Political forces include basic assumptions underlying  the political system, such as the desirability of self-government, property rights, contract rights, the definition of justice, and the determination of innocence or guilt of a crime. The spread of capitalism throughout the world has altered the business landscape dramatically.  The dominance of the free-market  system and growing  interdependencies among the world’s countries re- quire organizations to operate differently  and managers to think in new ways. At the same time, strong anti-American  sentiments in many parts of the world create challenges for U.S. companies and managers.

Economic forces pertain  to the availability, production, and distribution of resources in a society. Governments, military agencies, churches, schools, and business organizations in every society require resources to achieve their goals, and economic forces influence the allocation of scarce resources. Less-developed countries  are growing  in economic power, and the economy of the United States and other developed countries is shifting dramati- cally, with the sources of wealth, the fundamentals of distribution, and the nature of eco- nomic decision making undergoing significant changes.73

Today’s economy is based as much on ideas, information, and knowledge as it is on ma- terial resources. Supply chains and the distribution of resources have been revolutionized by digital technology.  Surplus inventories,  which  once could trigger recessions, are declin- ing or completely disappearing.

Another economic trend is the boom in small and midsized  businesses, including start-ups, which early in the twenty-first century grew at three times the rate of the na- tional economy. “I call it ‘the invisible economy,’ yet it is the economy,”  says David Birch of Cognetics Inc., a Cambridge,  Massachusetts, firm that tracks business formation.

A massive shift in the economy is not without its upheavals, of course. In the early 2000s, years of seemingly endless growth ground to a halt as stock prices fell, particularly for dot-com  and technology companies. Numerous Internet-based companies went out of business, and organizations throughout the United States and Canada began laying off hundreds of thousands of workers. This economic downturn, however, also may be a stim- ulus for even greater technological innovation and small business vitality.

Management  practices and perspectives vary in response to these social, political,  and eco- nomic forces in the larger society. During difficult times, managers look for ideas to help them cope with environmental  turbulence and keep their organizations vital. A management tools survey conducted by Bain & Company, for example, reveals a dramatic  increase over the past dozen or so years in the variety of management ideas and techniques used by managers.

Challenges such as a tough economy and a rocky stock market, environmental  and or- ganizational  crises, lingering  anxieties over war and terrorism,  and the public suspicion and skepticism resulting from corporate scandals leave executives searching for any man- agement tool—new  or old—that  can help them get the most out of limited resources.

This search  for guidance  is reflected  in a  proliferation of books, scholarly  articles, and conferences dedicated to examining management fashions and trends.

2. CLASSICAL  PERSPECTIVE

Although the practice of management  can be traced to 3000 B.C.E. to the first govern- ment organizations developed by the Sumerians and Egyptians, the formal study of man- agement is relatively recent.77  The early study of management  as we know it today began with what  is now called the classical perspective, which  emerged during the nineteenth and early twentieth centuries.

The factory system that began to appear in the 1800s posed challenges that earlier orga-nizations had not encountered. Problems arose in tooling the plants, organizing managerial structure, training  employees (many of them non-English-speaking immigrants), schedul- ing complex manufacturing  operations, and dealing with increased labor dissatisfaction and resulting strikes.

The myriad new problems and the development of large, complex organizations de- manded a new approach to coordination and control, and a “new sub-species of economic man—the salaried manager”78—was born. Between 1880 and 1920, the number of profes- sional managers in the United States grew from 161,000 to more than 1 million.79 These professional managers began developing and testing solutions to the mounting challenges of organizing, coordinating,  and controlling large numbers of people and increasing worker productivity. Thus began the evolution of modern management with the classical perspective.  This perspective contains  three subfields,  each  with a  slightly different emphasis: scientific  management,   bureaucratic organizations, and  administrative principles.

Efficiency  is   everything. The somewhat  limited success  of organizations in achieving improvements  in labor productivity led a  young engineer to suggest that the problem lay more in poor management practices than in labor. Frederick Winslow Taylor (1856–1915) insisted that management itself would have to change and, further, that the manner of change could be determined only by scientific study. Hence, the label scientific management emerged. Taylor suggested that decisions  based on rules of thumb and tradition be replaced with precise procedures developed after careful study of individual situations.81

Taylor’s philosophy is encapsulated in his statement, “In the past, the man has been first. In the future, the system must be first.”82 The sci-

entific management approach is illustrated by the un- loading of iron from rail cars and the reloading of fin- ished steel for the Bethlehem  Steel plant in 1898. Taylor calculated that, with the correct movements, tools, and sequencing, each man was capable of load- ing 47.5 tons per day instead of the typical 12.5 tons. Taylor also worked  out an incentive system that paid each man $1.85 a day for meeting the new standard, an increase from the previous rate of $1.15. Productivity at Bethlehem Steel shot up overnight.

These insights helped to establish organizational as- sumptions that the role of management is to maintain stability and efficiency, with top managers doing the thinking and workers doing what they are told.

How to get organized. Another subfield of the classical perspective took a broader look at the orga- nization. Whereas scientific management  focused  pri-marily on the technical core—on work performed on the shop floor—administrative principles looked at the design and functioning of the organization   as a whole. For example, Henri Fayol proposed fourteen principles of management,  such as: “Each subordinate receives orders from only one superior” (unity of com- mand), and “similar activities in an organization should be  grouped  together under one manager”  (unity of direction). These principles formed the foundation for modern management practice and organization design.

The scientific management and administrative principles approaches were powerful  and gave organizations  fundamental  new ideas for establishing high productivity  and increasing prosperity. The administrative principles in particular contributed to the development of bu- reaucratic organizations, which emphasized designing and managing organizations  on an impersonal, rational basis through elements such as clearly defined authority and responsibil- ity, formal record keeping, and uniform application of standard rules. Although the term bureaucracy has taken on negative connotations in today’s organizations, bureaucratic charac- teristics worked extremely well for the needs of the Industrial Age.

The term bureaucracy has taken  on a negative meaning  in today’s organizations and is associated with endless rules and red tape. We all have been frustrated by waiting  in long lines or following seemingly silly procedures. Rules and other bureaucratic procedures, however,  provide  a standard  way of dealing with employees. Everyone  gets equal treat- ment, and everyone knows what the rules are. This foundation enables many organizations to become extremely efficient. UPS serves as a good example.83

One problem with the classical perspective is that it failed to consider the social context and human needs. Early work on industrial  psychology and human relations received little attention because of the prominence of scientific management. A major breakthrough came, however, with a series of experiments at a Chicago electric company, which came to be known as the Hawthorne Studies. Interpretations of these studies concluded that posi- tive treatment of employees improved  their motivation and productivity.  Publication of these  findings led to a  revolution in worker treatment and laid the groundwork for subsequent work examining the treatment of workers, leadership, motivation,  and human resource management.

From a historical  perspective, whether the studies were academically sound is of less impor-tance than the fact that they stimulated increased interest in looking at employees as more than extensions of production  machinery. The interpretation that employees’ output increased when managers treated them in a positive manner  started a revolution in worker treatment for improving organizational productivity. Despite flawed methodology or inaccurate conclusions, the findings provided the impetus for the human relations movement.

IBM, one of the earliest proponents of a human  relations  approach, shaped manage- ment theory and practice for well over a quarter century. The company’s belief that atten- tion to human relations is the best approach  for increasing productivity still persists today.

3. HUMAN RESOURCES PERSPECTIVE

The human relations movement initially espoused  a dairy farm view of management: Contented  cows give more milk, so satisfied  workers  will give more work. Gradually, views with deeper content began to emerge. The human  resources perspective main- tained an interest in worker participation and considerate leadership  but shifted the emphasis to the daily tasks that people perform. The human resources perspective com- bines prescriptions for design of job tasks with theories of motivation.85  In the human resources view, jobs are designed so tasks are not perceived  as dehumanizing or demean- ing but, instead, allow workers to use their full potential. Two of the best-known con- tributors to the human resources  perspective  were Abraham Maslow and Douglas McGregor.

Abraham Maslow (1908–1970),  a practicing  psychologist,  observed that his patients’ problems usually stemmed from an inability to satisfy their needs. Thus, he generalized his work  and suggested a hierarchy  of needs. Maslow’s  hierarchy  started with physiological needs and progressed to safety, belongingness, esteem, and, finally, self-actualization needs.

Douglas McGregor (1906–1964), during the time he was president of Antioch College in Ohio, had become frustrated with the early simplistic human relations notions. He chal- lenged both the classical perspective  and the early human  relations assumptions about human behavior. Based on his experiences as a manager and consultant,  his training as a psychologist, and the work of Maslow, McGregor formulated his Theory X and Theory Y.86

McGregor believed that the classical perspective was based on Theory X assumptions about workers and posited that a slightly modified  version of Theory X fit early human relations ideas. In short, he believed that the human relations ideas of the time did not go far enough. McGregor proposed Theory Y as a more realistic view of workers for guiding management thinking.

The point of Theory Y is that organizations  can take advantage of the imagination and intellect of all their employees. Employees will exercise self-control and will contribute to organizational goals when given the opportunity. A few companies today still use Theory X management, but many are using Theory Y techniques.

4. BEHAVIORAL  SCIENCES  APPROACH

The behavioral  sciences approach  develops theories  about  human  behavior  based on scientific methods and study. Behavioral  science draws from sociology, psychology, an- thropology, economics, and other disciplines to understand employee behavior and inter- action in an organizational setting. The approach can be seen in practically every organiza- tion. When General Electric conducts research to determine the best set of tests, interviews, and employee profiles to use when selecting new employees, it is applying  behavioral science techniques.  When Circuit City electronics  stores train new managers  in the techniques of employee motivation, most of the theories and findings  are rooted in behav- ioral science research.

Nevertheless, the hierarchical  system and bureaucratic approaches that came about dur- ing the Industrial Revolution remained the primary approach to organization design and functioning well into the 1970s and 1980s. In general, this approach worked well for most organizations until the past few decades. During the 1980s, however, it began to lead to problems. Increased competition,  especially on a global  scale, changed  the playing field. North American companies had to find a better way. The 1980s produced new corporate cultures that valued lean staff, flexibility, rapid response to the customer, motivated em- ployees, caring for customers, and quality products.

Over the past two decades, the world  of organizations has undergone even more profound and far-reaching  changes. The Internet and other advances in information technology, glo- balization,  rapid social and economic changes, and other challenges from the environment call for new management perspectives and more flexible approaches to organization design.

Don’t forget the environment. Many problems arise when all organizations are treated as similar,  which was the case with scientific management and administrative principles approaches that attempted to design all organizations the same. The structures and systems that work in the retail division of a conglomerate  will not be appropriate  for the manufacturing division. The organization  charts and financial procedures that are best for an entrepreneurial Internet firm such as eBay or MaMaMedia will not work for a large food processing plant.

Contingency means that one thing depends on other things, and for organizations to be effective, there must be a “goodness of fit” between their structure and the conditions in their external environment. What works in one setting may not work in another set- ting. There is not one best way. Contingency  theory means “it depends.” For example, some organizations have a certain environment,  use a routine technology, and desire effi- ciency. In this situation,  a management  approach that uses bureaucratic control proce- dures, a hierarchical structure, and formal communication would be appropriate. Likewise, free-flowing management processes work  best in an uncertain environment with nonrou- tine technology. The correct management approach is contingent on the organization’s situation.

Today, almost all organizations operate in highly uncertain environments. Thus, we are involved in a significant  period of transition, in which concepts of organizations and man- agement are changing  as dramatically as they changed with the dawning of the Industrial Revolution.

5. TOTAL  QUALITY MANAGEMENT

The quality movement in Japan emerged  partly as a result  of American influence after World War II. The ideas of W. Edwards Deming, known as the “father of the quality movement,” were scoffed at in the United States initially, but the Japanese embraced his theories and modified them to help rebuild their industries into world powers.87   Japanese companies achieved a significant departure from the American model by gradually shifting from an inspection-oriented  approach to quality control toward an approach emphasizing employee involvement in the prevention of quality problems.88

During the 1980s and into the 1990s, total quality management (TQM), which focuses on managing the total organization to deliver quality to customers,  was at the forefront in helping managers deal with global competition. The approach infuses qual- ity values throughout every activity within a company,  with front-line workers intimately involved in the process. Four significant elements of quality  management are employee involvement, focus on the customer, benchmarking, and continuous improvement.

Employee involvement means that TQM requires companywide participation  in quality control. All employees are focused on the customer; TQM companies find out what cus- tomers want and try to meet their needs and expectations. Benchmarking refers to a process whereby companies find out how others do something better than they do and then try to imitate or improve on it. Continuous improvement is the implementation of small, incre- mental improvements in all areas of the organization on an ongoing basis.

TQM  is not a quick  fix, but companies such as General  Electric,  Texas Instruments, Procter & Gamble, and DuPont achieved astonishing  results in efficiency, quality, and customer satisfaction through total quality management.89 TQM is still an important part of today’s organizations, and managers consider benchmarking  in particular to be a highly effective and satisfying management technique.90

Some of today’s companies  pursue highly ambitious quality goals to demonstrate their commitment to improving quality. For example, Six Sigma, popularized  by Mo- torola and General Electric, specifies  a goal  of no more than 3.4 defects per million parts. But the term also refers to a broad quality  control approach that emphasizes  a disciplined and relentless pursuit of higher quality and lower costs. TQM  is discussed in detail in Chapter 15.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.