Chapter

1. Chapter 1 Management and Its Evolution McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

2. Learning ObjectivesAfter reading this chapter, you should be able to: • Understand the roles played by individuals, teams, and managers in carrying out company activities. • Practice the four major functions of management • Recognize the interpersonal, informational, and decisional roles played by top level managers. • Apply the general skills needed to carry out managerial responsibilities. • Integrate the major elements from the various perspectives of management theory. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

3. The performance of organizations depends to a large extent on how their resources are allocated and their ability to adapt to changing conditions. Successful organizations know how to manage people and resources efficiently to accomplish organizational goals and to keep those goals in tune with changes in the external environment. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

4. Management in the New Millennium • A firm can be efficient by making the best use of people, money, physical plant, and technology. • It is ineffective if its goals do not provide a sustained competitive advantage. • A firm with excellent goals would fail if it hired the wrong people, lost key contributors, relied on outdated technology, and made poor investment decisions. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

5. Levels of management Strategic Managers Tactical Managers Operational Managers McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

6. Strategic Managers • The firm’s senior executives with overall responsibility for the firm. • Developing the company’s goals • Focus on long-term issues • Emphasize the growth and overall effectiveness of the organization • Concerned primarily with the interaction between the organization and its external environment. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

7. Tactical Managers • Responsible for translating the general goals and plans developed by strategic managers into specific objectives and activities. • Shorter time horizon • Coordination of resources • These are middle managers McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

8. Operational Managers • Lower-level managers who supervise the operations of the organization. • Directly involved with non-management employees • Implementing the specific plans developed with tactical managers. • This is a critical role to the organization. • Operational managers are the link between management and non-management staff McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

9. Management Functions Planning Organizing Leading Controlling McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

10. Planning • The management function that assesses the management environment to set future objectives and map out activities necessary to achieve those objectives. • To be effective, the objectives of individuals, teams, and management should be coordinated to support the firm’s mission. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

11. Organizing • The management function that determines how the firm’s human, financial, physical, informational, and technical resources are arranged and coordinated to perform tasks to achieve desired goals. • The deployment of resources to achieve strategic goals. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

12. Leading • The management function that energizes people to contribute their best individually and in cooperation with other people. • This involves: • Clearly communicating organizational goals • Inspiring and motivating employees • Providing an example for others to follow • Guiding others • Creating conditions that encourage management of diversity McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

13. Controlling • The management function that measures performance, compares it to objectives, implements necessary changes, and monitors progress. • Many of these issues involve feedback or identifying potential problems and taking corrective action. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

14. Management as a set of roles • Day-to-day management activities are routine, orderly, and rational. • These include: • Interpersonal roles - communication with superiors, peers, subordinates, and people from outside the organization. • Information Roles - obtaining, interpreting, and giving out information. • Decisional Roles - choosing amongcompeting alternatives. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

15. Management as a set of skills • The four basic management functions require a set of skills to be carried out properly. • Because most managerial tasks are unique, ambiguous, and situation-specific, there is seldom one best way to approach them. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

16. Management as a set of skills • Four major categories of skills will help you become a good manager: • Strategic Skills - the ability to see “the big picture”, focus on key objectives without getting mired in details, and having a sense what is happening inside and outside the company. • Task-Related Skills - the ability to define the best approach to accomplish personal and organizational objectives. They include consideration of all resources, including time, organizational structure, financial resources, and people. They also involve the ability to prioritize, remain flexible to make necessary changes, and ensure that value is being created McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

17. Management as a set of skills • People-Related Skills - getting work done through others and with others. Include the ability to delegate tasks, share information, resolve conflicts, be a team player, and work with people from very different backgrounds • Self-Awareness Skills - Being aware of your personal characteristics can help you adapt to others and can help you understand why you react to them the way you do. These skills can help you to avoid rushed judgments, appreciate the nuances of particular situations, size up opportunities, capitalize on your personal strengths, and avoid situations in which you are likely to fail. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

18. Strategic Skills Environmental assessment scanning Strategy formulation Mapping strategic intent and defining mission Strategy implementation Human resource congruency Task Skills Setting and prioritizing objectives Developing plan of action and implementation Responding in a flexible manner Creating value Working through the organizational structure Allocating human resources Managing time efficiently Skills for Managerial Success McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

19. People Skills Delegating Influencing Motivating Handling conflict Win-win negotiating Networking Communicating Verbal Nonverbal Listening Cross-cultural management Heterogeneous teamwork Self-Awareness Skills Personal adaptability Understanding personal biases Internal locus of control Skills for Managerial Success (continued) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

20. The Evolution of Management Thought Early Management Thought Classical Perspective Contemporary Management Perspectives Behavioral Perspective McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

21. Early Management Thought • Early ideas about management strategy • Sun Tzu, The Art of War • Early ideas about leadership • Nicolò Machiavelli, The Prince • Early ideas about the design and organization of work • Adam Smith, The Wealth of Nations • division of labor McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

22. The Operational Perspective • Scientific Management • Frederick W. Taylor • Quantitative Management • Ford W. Harris • Quality Management • Walter A. Shewhart • Bureaucratic Management • Max Weber • Administrative Management • Henri Fayol McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

23. SCIENTIFIC MANAGEMENT • Frederick W. Taylor – early 20th century • Methods engineering/time and motion studies • Basic observations • Great loss through inefficiencies • Remedy in systematic management • Best management is a true science • Standardization of job performance and uniformity of behavior • Impersonalization and replaceability of workers is key to efficiency • Motivation through monetary incentive systems

24. SCIENTIFIC MANAGEMENT • STUDIES AT BETHLEHEM IRON WORKS IN 1898 REPORTED BY TAYLOR • Picked Schmidt (Nolls) as his subject • Trotted to and from work (over a mile) • Had purchased land and was building a house • Had reputation of being “close with a dollar” • Increased from 12 ½ to 47 tons • Pay increased from $1.15 to $1.85 • Earlier studies had failed because of social influences

25. SCIENTIFIC MANAGEMENT • Frank and Lillian Gilbreth • Developed tools for scientific management – time and motion studies • Trained industrial engineers • Popular subjects for newsreels in the 1920s • “Cheaper by the Dozen” movie (not the new one) • Economic needs versus other needs

26. Key Characteristics of Weber’s Ideal Bureaucracy • Specialization of labor – functional specialization • Formal rules and procedures – uniformity/stability • Impersonality - fairness for clients and employees • Well-defined hierarchy - decentralization • Career advancement based on merit/seniority • Lifelong career commitment McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

27. BENEFITS Consistency Jobs clearly defined Expertise/specialization Continuity Efficient under conditions of stability COSTS Rigid rules and red tape Protection of authority Slow decision making Incompatibility with changing technology Incompatibility with worker values BUREAUCRATIC MANAGEMENT

28. ASSESSING BUREAUCRATIC MANAGEMENT • MOST EFFECTIVE WHEN: • 1. Standardized information/production requiring efficiency • 2. Needs of customers known and not changing • 3. Technology is routine and stable • 4. Need to coordinate activities of large numbers of employees

29. ADMINISTRATIVE MANAGEMENT • Henri Fayol – French industrialist – 14 principles • 1. Division of labor – specialization • 2. Authority and responsibility – delegation • 3. Discipline – clear rules and consequences for violating • 4. Unity of command – one boss for each employee • 5. Unity of direction – similar activities under one manager • 6. Subordination of individual interests to the common good • 7. Remuneration – fair pay • 8. Centralization – power and authority at the top

30. ADMINISTRATIVE MANAGEMENT • 9. Scalar Chain – from the lowest employee to the top • 10. Order – human and materials coordinated • 11. Equity – managers should be fair with subordinates • 12. Stability and tenure of staff – avoid high turnover • 13. Initiative – free to take initiative • 14. Esprit de corps – team spirit, sense of unity

31. Behavioral Perspective • The behavioral perspective acknowledges that psychological and social processes of human behavior can result in improvements in productivity and work satisfaction. • The Hawthorne effect - when a manager shows concern for employees, their motivation and productivity levels are likely to improve. • Human Relations Approach - the relationship between employees and a supervisor is a vital aspect of management. • Employee motivation • Leadership style McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

32. Hawthorne Effect The discovery that paying special attention to employees motivates them to put greater effort into their jobs. (from the Hawthorne management studies, performed from 1924 – 1932 at Western Electric Company’s plant near Chicago) McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

33. HAWTHORNE STUDIES • Lighting studies by industrial engineers • Productivity continued to increase even when lighting was reduced below starting levels • Motivational factor • Restriction of work through productivity norms • Relay Assembly Test Room Studies • Five workers plus supervisor • Group incentive plan • Mayo (not a researcher in the study) concluded that the results supported his theories concerning work groups replacing family

34. HAWTHORNE STUDIES • Five workers not randomly selected • Two workers replaced because not cooperating • Replacements wanted to be in the experiment because of the financial incentives – one of these became the informal leader • Workers formed tightly knit, cohesive work group with high production goals operating under informal, participative leadership plus a strong informal leader within the group • If all of the results are considered, the behavioral approach has consistencies with the original scientific management studies

35. Contemporary Management Perspectives • Systems Theory • Contingency Theory • The Learning Organization Perspective McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

36. Systems Theory • Views the organization as a system of interrelated parts that function in a holistic way to achieve a common purpose. • Systems theory concepts that affect management thinking: • Open and closed systems • Subsystems • Synergy • Equifinality McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

37. Contingency Theory • States that there is no “one best way” to manage an organization. • Because what works for one organization may not work for another • Situational characteristics (contingencies) differ • Managers need to understand the key contingencies that determine the most effective management practices in a given situation McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

38. The Learning Organization • The management approach based on an organization anticipating change faster than its counterparts to have an advantage in the market over its competitors. • There are two ways organizations can learn: • Experimental learning • External learning McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.