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MANAGEMENT – A CASE STUDY – Pt 2

Matthew Tibble

February 14, 2007

This is the second article in a series looking at Management and how you can understand it better and use it in your business. For the previously published sections, please contact BusinessPlanningMadeEasy.com using the links at the bottom of the article.

HISTORY OF MANAGEMENT TECHNIQUES

What we today know as Management - as a career, job title, and a part of business - has been fine-tuned over a hundred years of business activity. Many theories and approaches were developed and implemented, and each has left their mark on how businesses manage their activities today. Understanding what these theories are, and what the objectives were for each, will help give you a fuller understanding of how managers operate today.

Scientific Management theory (approximately 1890-1940)

In 1911, a new approach to management began. Its objective was to establish an approach to management that saw an organisation maximizing efficiency and productivity within its operations. This method advocated there is one best way with which to complete a task, and was developed at a time when the industrial revolution was just beginning. It was common that there could be up to 20 ways to complete a task, and each would produce different results in different times. This situation led to gross inefficiencies of staff time and productivity was low. Scientific Management set about defining the tasks that an employee had as their responsibility, and put these tasks into a system or method whereby other staff can be trained to complete the same job in the same way.

At this time in the industrial revolution (that period at the start of the 20th Century when industry was breaking new grounds and there was massive expansion in workforce and production), workers and managers were in continual conflict. Workers were put onto jobs without much thought about their abilities, and managers were viewed as looking after their own needs and not the needs of the workers.

A common incentive method used with this management approach was economic incentives - i.e., more money for work completed on or before it was due. Once the right person with the right tools and training was placed on the job, extra incentives were given to help them complete the job in as quicker time as possible.

Scientific Management techniques were developed to respond to a massive increase in labour-intensive jobs. Today's society and production can complete similar tasks in a fraction of the time, thanks to modern development of technology (i.e. forklifts, etc). However, what this approach established was the effective pairing of skills and abilities to a task, and assessing the output against a performance measure. Scientific management continually works at increasing the ROI (return on investment) of the company through process management.

General Administration Techniques (approximately 1910-1940)

This theory was already being developed at the same time as the Scientific Management technique, but with a different focus. The focus was on how the organisation worked as a whole, rather than efficiencies in the production areas of the business. This approach has led to overall good management practices in today's world. One of the most influential developers in this management theory was Henri Fayol, who described what he saw as the top 14 principles of the function of management.

1. Specialization of labour. Specializing encourages continuous improvement in skills and the development of improvements in methods.
2. Authority. The right to give orders and the power to exact obedience.
3. Discipline. No slacking, bending of rules.
4. Unity of command. Each employee has one and only one boss.
5. Unity of direction. A single mind generates a single plan and all play their part in that plan.
6. Subordination of Individual Interests. When at work, only work things should be pursued or thought about.
7. Remuneration. Employees receive fair payment for services, not what the company can get away with.
8. Centralization. Consolidation of management functions. Decisions are made from the top.
9. Scalar Chain (line of authority). Formal chain of command running from top to bottom of the organisation, like military
10. Order. All materials and personnel have a prescribed place, and they must remain there.
11. Equity. Equality of treatment (but not necessarily identical treatment)
12. Personnel Tenure. Limited turnover of personnel. Lifetime employment for good workers.
13. Initiative. Thinking out a plan and do what it takes to make it happen.
14. Esprit de corps. Harmony, cohesion among personnel.

As part of this approach, a bureaucratic system was designed. This was characterized as a division of labour and a clearly defined hierarchy within an organisation, with detailed rules and regulations. The bureaucratic approach to management is, in its purest form, not used in today's management practices. This type of system is not overly conducive to allow an individual's creativity and talent come through their work, due to the nature of the system (rules, regulations, etc). However, it does lend organisations a useable base format that is used to develop internal organisational structures that can be adapted and adjusted to fit with the needs of the business and its workers.

Quantitative Technique (approximately 1940-1960)

During World War 2, many countries involved in the War needed to apply a quantitative approach to making decisions with respect to their armed forces, what decision gave the best result, fewer losses, highest impact, and so on. It effectively took the human element out of the equation, and used mathematical models to make decisions.

The Quantitative Technique uses the same approach. Decisions were based on the statistical models, simulations and the like. Before a decision was made, a predication of the outcomes was made, and the results of the predication led to a particular decision being made. Although this approach has influenced modern management techniques in the areas of planning and control, it has its limits. This method does not allow for the personality or the spirit of the organisation to be factored in when making a decision. As a business is made up of people carrying out set tasks, it was recognized that a method that incorporated this element of an organisation would be more effective.

Organisational Behaviour Techniques (approximately 1940-1970)

The study of how people were treated at work, and how this impacted on the performance of the business, began long before the mid 1950's-1960's. Common sense indicated that how people are managed on a interpersonal level impacted on the company, but there was no systematic way that this process could be integrated into an organisation.

This new approach to people management inspired studies and new methods revolving around human relations and the importance of motivating the workforce. The underling premise was that workers were more important than machinery, and should therefore be treated with greater care and understanding if the business was to perform better.

This theory focuses on the importance of employee satisfaction. It advocates that a happy employee is a productive employee, and is concerned with how a business interacts humanely with its employees. Now, it is understood that to achieve the best performance of a business means that its staff are treated well and their needs are met. However, this approach took time to develop. Motivating employees through money incentives alone became less and less effective, and employees soon wanted to have their efforts recognized and rewarded beyond extra pay in their pay-check.

Both Scientific and General Administrative Techniques viewed employees as an extension of the machinery they operated. The manager's role was to ensure that the system continued performing efficiently and with little interruption. These methods did not take into account the individual needs of the staff, which would ultimately lead to employee dissatisfaction and inefficiencies. Modern day management techniques blend aspects of these techniques to balance the needs of the business with the needs of the employees. This relationship is symbiotic, and one can not succeed without the help of the other.

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