Business Management Dersi 2. Ünite Özet

The Evoluation of Management Thought

The history of management thought does not refer to a chronological listing of events. The appropriate approach to study the history of management should be developing an understanding of the impact of environmental forces that affect organizations. Thus, analysis of social, political , economic, and technological forces that affect management practices over time serves as a good starting point..

Environmental Forces That Affect Management Practices

Social forces refer to macro factors within social, cultural, and historical context. All these macro factors have a direct impact on organizations. Values, attitudes, beliefs, and all requirements of the people within the society in which the organization operates can be considered as the elements of social forces. Furthermore, social forces are important for the organizations since they regulate the relations between individuals in a society.

Political forces refer to the affects of political and legal institutions on organizations and individuals. They result from political and legal developments within the society and significantly affect managerial practices. Such developments in the political and legal structure of the society offer both opportunities and threats by establishing constraints for operations of the organizations.

Economic forces refer to the factors that determine the nature of the economic conditions in which businesses operate. Unemployment rates, fiscal policies and legislations, inflation rates, interest rates, and general economic conditions such as crises, stagnation, and recession are among the major economic factors.

Technological forces refer to the innovations and changes in technology that can potentially affect the business processes. Changes in technology are constant and faster than ever. In the management literature, technology is considered to be one of the main pillars of an organization.

All management theories and practices throughout the history of management thought were developed as a response to social, political, economic, and technological changes.

Classical Management Theory

The classical management theory involves several approaches: systematic management, scientific management, bureaucracy, and general administrative management.

Systematic Management Approach

The systematic management approach is an attempt to build specific procedures and processes to systematize organizational activities and ensure coordination.

The systematic management approach focused on operational economy, adequate staffing, inventory management that meets customer requirements, and organizational control. According to the systematic management approach, these goals can be achieved through:

1. Careful definition of tasks and responsibilities,
2. Standardized methods for performing these tasks,
3. Effective means of gathering, sharing, and analyzing information,
4. Systems such as cost accounting, wage management, and production control to enhance organizational coordination and communication.

Scientific Management Approach

The scientific management approach focused on the methods to use workforce more efficiently and finding the best way to solve organizational problems.

Frederick W.Taylor, also known as the father of scientific management, was the pioneer in the scientific management approach. When he first started working for the Midvale Steel in Philadelphia, he figured that the workers were performing their tasks much slower than they normally could, therefore causing inefficiency. Taylor studied all the aspects of the tasks of the steel workers and he determined how much each worker should produce. Taylor also designed the most efficient way to perform specific tasks and finally, established a piece- based wage system.

General Administrative Management

While systematic and scientific management focused on tasks and labor efficiency, general administrative management approach focused on organizational management. French industrialist and mining engineer Henri Fayol (1841-1925) was the leading name in the general administrative management approach. Fayol played an important role in the history of management thought. He identified five managerial functions namely, planning, organizing, commanding, coordinating, and controlling. According to Fayol, there are six activities directly involved with industrial projects.

1. Technical: Activities related to production,
2. Commercial: Activities related to buying, selling, and exchange,
3. Financial: Activities related to search for, and optimum use of capital,
4. Security: Activities related to securing property and individuals,
5. Accounting: Activities related to quantitative/statistical analysis,
6. Managerial: Activities related to planning, organizing, commanding, coordinating, and controlling.

Bureaucracy Approach

The last approach in the classical management theory is the bureaucracy approach introduced by the German sociologist Max Weber (1864-1920). Although Weber lived and worked at the same time as Fayol and Taylor, his contributions to the management thought were not recognized until some years had passed. Weber’s most important work was not translated into English until 1947. Weber’s ideal bureaucracy laid the foundations for contemporary organization theory. Principles and advantages of Weber’s ideal bureaucracy are as follows:

1. Division of labor:
2. Authority of hierarchy:
3. Formal selection:
4. Career orientation:
5. Formal framework of rules:
6. Impersonality:

The starting point of the classical management theory was to introduce methods to improve productivity within the organization and find the best way or the best solution to tackle organizational problems.

Behavioral Management Theory

Behavioral management theory focused on how managers should behave to motivate employees, encourage them to perform better, and improve their loyalty to the organization and its goals. Mary Parker Follett (1868- 1933) was the leading name in the behavioral management theory. The majority of Follett’s work was about the way managers should behave toward employees.

Hawthorne Studies

The Hawthorne Studies were initially started to confirm or test the main assumptions of the classical management theory. Experiments were basically designed to analyze the relationship between productivity and work settings.

The Hawthorne studies revealed the significance of psychological and social factors in the workplace. Findings of the Hawthorne studies had a major impact on the management studies.

Douglas McGregor’s Theory X and Theory Y

Another leading name in the behavioral management theory was Douglas McGregor. Influenced by the Hawthorne studies and Maslow’s theory of human needs, McGregor introduced theories of X and Y. In his classic book “The Human Side of Enterprise”, McGregor suggested that managers should give more attention to the social and self-actualizing needs of the employees.

Quantitative Management Approach

The quantitative approach to management refers to a perspective on management that emphasizes use of a group of methods in managerial decision making, based on the scientific method. Today, quantitative approach is mainly represented by management science and operations research. Statistics, linear programming, network analysis, decision trees, and computer simulations are among the quantitative tools and methods adopted by the quantitative management approach.

Quantitative approach to management helped managers to solve business problems that cannot be solved by common sense and the rule of thumb alone. On the other hand, there are weaknesses of quantitative management approach. In many cases, quantitative techniques produce less reliable results than expected. Although the approach itself uses dependable tools and methods, much of the data used for forecasts are based on human estimations that in return makes quantitative management approach unreliable in some cases.

System Approach

A system basically refers to a structure of interrelated parts. Systems transform inputs into outputs to achieve specific goals. All open systems have five main aspects: inputs, transforming process, outputs, environment, and feedback. From the organizational standpoint, raw materials, human resources, financial resources, and information resources are a few examples of inputs. These inputs are used by the organization to produce outputs (products and services). Transforming process refers to the use of technologies to transform inputs into outputs. Outputs refer to the products and services offered by the organization.

In the systems approach, there are several key concepts such as open and closed system, entropy and negative entropy, synergy, and interdependence between the subsystems.

Open and closed systems: The systems approach suggests that there are two types of systems, namely, open and closed systems. Closed systems are self-contained entities and thus they are not affected by the changes occurring in its external environment. On the other hand, open systems depend on the external environment in order to survive.

Entropy and negative entropy: Entropy is a common quality of both open and closed systems. Entropy refers to the system’s tendency to go into a decline and die. No system is capable of stopping entropy. All attempts and efforts to slow entropy down are known as negative entropy. Negative entropy is very important for business survival. Rapid and constant changes in the environmental forces are the main cause of entropy.

Synergy and interdependence between subsystems: Synergy basically means that the whole is greater than the sum of its parts. Synergy, as a key concept in the systems theory, is also important for managers. Because synergy emphasizes the value of working together in collaboration to achieve organizational goals.

Synergy also emphasizes the interdependence between the subsystems. The idea of unity and integrity sheds light on the nature of the mutual relations between subsystems.

Because parts of the systems cannot behave independently. Any problem that occurs in a subsystem affects the system as a whole. Such strong ties between the subsystems is a solid proof of interdependence.

Contingency Approach

In contrast to the classical management theory’s search for the best way to solve organizational problems, the contingency approach rejects the idea that there is a best way or a solution for all organizational problems. According to the contingency approach, managerial practices are shaped by contingent and situational circumstances. Actually, this approach emphasized an “if- then” relationships.

According to the contingency approach, the characteristics of the environment directly affect an organization’s ability to obtain resources. It should be noted that how managers design the organizational hierarchy, choose the control mechanism, and lead their employees are contingent on the characteristics of the organizational environment.

Organizational structures and control mechanisms’ managers choose depend on the characteristics of the environment in which the organization operates.

It should be noted that, from the classical management theory to the contingency approach, the focus of the management practices had shifted throughout the history of management. On the other hand, assuming that the management theories and practices introduced in the early 20th century are not applicable or influential anymore is a false argument. A successful manager knows how management practices and approaches evolved in time. Such a knowledge on management helps managers to adopt the most appropriate approach when dealing with organizational problems.