Strategic Management

Chapter 2

Management Yesterday and Today

What does history tell us about management?

Organised endeavours have existed for thousand of yearso E.g. the pyramids and the arsenal of Venice (warships on the canal,

filled at with various things at various stops along the canals) Two important historical events:

o Adam Smith’s Wealth of Nations published Outlines the economic advantages of the division of labour The division of labour or job specialisation = the

breakdown of jobs into narrow and repetitive tasks Increased productivity by increasing individual workers

skill and dexterity Save time lost in changing tasks

o The Industrial Revolution = the advent of machine power, mass production and transport efficiency

18th century Great Britain Change from the manufacturing of goods in homes to in

factories The need for formal management theory was established

The 6 Main Approaches to Management

1. Scientific Management2. General Administrative Theory3. Quantitative Approach4. Organisational Behaviour5. Systems Approach6. Contingency Approach

What is scientific management?

Scientific Management = the use of scientific method to define the ‘one best way’ for a job to be done

Important contributors:

o Frederick W. Taylor: Clear guidelines for improving production efficiency Four principles of management

1. Develop a science for each element of an individual’s work, which will replace the old rule-of –thumb method

2. Scientifically select, then train, teach and develop the worker (previously, workers chose their own work and trained themselves as best they could)

3. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed.

4. Divide work and responsibility almost equally between management and workers. Management takes over all the work for which it is better fitted that the workers are. (Previously, almost all the work and the greater part of the responsibility were thrown on the workers)

Pig-iron experiment Put the right person on the right job With the correct tools and equipment Had the worker follow his instructions exactly Motivated the worker with economic incentive

o Frank and Lilian Gilbreth Used motion pictures to study ways eliminate wasteful

hand and body movement Invented microchronometer – recorded a workers motions

and the amount of time spent doing each motion Therbligs = a classification system for labelling 17 basic

hand motions Still used today to improve efficiency

o To hire best qualified workers and design incentive schemes based on output

What is general administrative theory?

General Administrative Theory = Writers who developed more general theories of what managers do and what constituted good management practice

Focuses more on the whole organisation Important contributors:

o Henri Fayol Directed attention at the activities of all the managers Argued that management was an activity common to al

human endeavours in business, government and home 14 principles of management

Principles of management = the fundamental rules of management that could be taught in schools and applied in all organisational situations

1. Division of work (specialisation)2. Authority 3. Discipline (employees obey and respect)4. Unity of command (orders from one superior)5. Unity of direction6. Subordination of individual interests to the general

interest 7. Remuneration (workers paid fairly)8. Centralisation (degree to which employees involved

in decision making)9. Scalar chain (chain of authority from top to bottom)10. Order11. Equity12. Stability of tenure of personnel (provide

replacement personnel when necessary)13. Initiative14. Esprit de corps (promoting team spirirt and building

harmony)o Max Weber

Studied organisational activity Developed a theory of authority structures The ideal structure = bureaucracy

= a form of organisation characterised by division of labour, a clearly defined hierarchy, detailed rules and regulations, and interpersonal relationships

Model structure for today’s organisations Still used today as part of many current management concepts

o Weber not as relevant in today’s society as it makes it difficult to adapt to the dynamic environment

What is the quantitative approach to management?

Using quantitative techniques to improve decision making: also known as operations research and management science

Developed after the war as many military techniques to resolve problems were applied to business

Involves application of statistics, optimisation models, information models and computer simulations

Still used today, especially in planning and controlo In budgeting, scheduling and quality controlo Not as much influence as organisational behaviour

What is the organisational behavioural approach to management?

Organisational behaviour (OB) is the study of people at worko Early advocates (Owen, Munsterberg, Follett and Barnard)

Believe that people are the most important aspect of the organisation and should be managed accordingly

Employee selection procedures, employee motivation programs, employee work teams and organisation-external environment management techniques

o Hawthorne Studies The most important contribution Started as a scientific management experiment and went

through several phases, including illumination phase and group studies

Stimulated an interest in human behaviour in organisationso Although not based on any real research, the human relations

movement has some definite influence on management theory and practice.

Commitment to making management practices more humane – more satisfied employees perform better

Maslow (hierarchy of needs) and McGregor (theory X and theory Y)

Behavioural science theories Psychologists and sociologists who relied on

scientific method for the study of organisational behaviour

o Behavioural approach has largely shaped how today’s organisations are managed

What is the systems approach?

Systems = a set of interrelated and interdependent parts arranged in a manner that produces a unified whole

Closed systems = systems that are not influenced by and do not interact with their environment

Open systems = systems that dynamically interact with their environment Organisations are made up of ‘interdependent factors, including

individuals, groups, attitudes, motives, formal structure, interactions, goals, status and authority’

These interdependent factors must work together in an organisation Organisations are not self-contained and rely on environment for essential

inputs and as sources to absorb their outputs

What is the contingency approach?

No universally applicable management rules that would work in all situations

o It all depends: ‘if, then’

Different and changing situations require managers to use different approaches and techniques

Four contingency variables1. Organisational size2. Routineness of task technology3. Environmental Uncertainty4. Individual Differences (differ in terms of desire for growth,

autonomy, tolerance for ambiguity, expectations)

What are the current trends and issues impacting today’s managers?

Globalisationo No longer constrained by national borderso Working with people from different cultureso Coping with anti-capitalist backlash – economic values aren’t

universally transferable and must be modified to reflect the values of the different countries in which the company operates

o Movement of jobs to countries with low-cost labour – not just factory and call-centre workers, also includes well-educated individuals capable of working in an information-based economy’

Ethicso Process for addressing ethical dilemmas

What is the ethical dilemma? Who are the affected stakeholders? What personal, organisational and external factors are

important to my decision? What are possible alternatives? Make a decision and act on it.

Workforce diversityo = a workforce that is more heterogeneous in terms of age, gender,

race, ethnicity, age and other characteristics that reflect differences

o Brings a broad range of view-points and problem-solving skillso Ageing population

Entrepreneurshipo = the process whereby an individual or a group od indiiduals uses

organised efforts and means to pursue an opportunity to create value and grow by fulfilling wants and needsthrough innovation and uniqueness, no matter what resources are currently controlled.

E-business (enhanced, enabled, total)o = a comprehensive term describing the wat an organisation does

its work by using electronic (internet) linkages with its key constituencies in order to achieve its goals efficiently and effectively

o E-commerce = any form of business exchange or transaction in which the parties interact electronically

o Intranet = an internal organisational communication system that sues internet technology and is accessible only by organisational employees

Knowledge managemento Learning organisations = organisations that have developed the

capacity to learn, adapt and change continuously Learning organisations Quality management Management sustainability