Chapter Two

Evolution of Management Thought

2.1. Introduction
The practice of management can be dated back to thousands of years ago when human
beings started civilizations and were divided into tribes. Historically, there were many
evidences indicating the existence of management in early human careers. Some of the
evidences are:

i. The Egyptian civilization was known for planning, organizing, and controlling
during the construction of pyramids
ii. Early Greeks were known for their management concepts such as
specialization
iii. Advice Moses received from his father-in-law ,Jethro, while moving with a
large group of people (Exodus 18)
iv. The ancient Rome used to emphasis on personnel, selection and placement.
v. The existence of strong military forces in early human activities.

Although management practice has a very old age, management as a systematic body of
knowledge and distinct discipline is the product of 20th century, when different schools
of management thought began to develop. The industrial revolution, which began in 18 th
century and run through 20th century, was the main reason that led to development of
different management theories. Industrial revolution resulted in economic growth of
countries, minimized dependency on agriculture, and expansion of many and giant
industries which needed many employees/workers.

As a result, shortage in labor force who were to work in the factories had arisen.
Consequently, practicing managers started to think about how to use the existing labor
forces efficiently. In response to this, Robert Owen, for example, improved working
conditions in his factory by limiting working hours, and providing meal at the work place
for workers. Charles Babbage was interested in division of labor and other scientific
principles to have more work done by existing workers. These two individuals and other
similar persons are currently considered as forerunners to scientific management.

2.2. Schools of Management Thought

Starting from 20th century up to now different schools of management thought have been
developed. These schools can be classified as follows:
1. Classical Management Theory
 Scientific Management Theory( F. Taylor)
 Classical Organization Theory (H. Fayol)
2. Neo Classical Theory
 Behavioral or Human Relation theory (E. Mayo & How throne)
3. Modern Approaches
 System Approach
 Contingency Approach

Page 1
 1. Classical Management Theory
Classical management theory is a theory that focuses on finding the 'one best way'
to operate (perform) and manage tasks.

A. Scientific Management Theory(SMT)

Scientific management theory was developed mainly by a person called F.W.Taylor who
was a foreman at Bethlehem Midval Steel Factory in America. Taylor's primary
objective was to discover the most efficient way of doing a job and then train the workers
to do it that way. To do this he preferred scientific management principles or rules rather
than intuitions, judgments, experience generally called Rule of Thumb method. From his
experience Taylor observed that workers were inefficient. The major reasons for
inefficiency were as follows:
 Standards of performance were not properly determined
 The existing pay system was not motivating
 The responsibilities of management and other workers were not clearly
distinguished
 There was no specialization as such
 There were antagonistic relationships between management and subordinates
Therefore, Taylor had attempted to find solutions for the above problems. Consequently,
the basic components of scientific management were profounded (developed) by him.
These include:
1. determination of standards of performance scientifically
2. differential and piece-rate payment system
3. identification of responsibilities of management
4. specialization of functional foremanship
5. mental revolution

1. Determination of standards of performance scientifically

Taylor argued that standard of performances should not be determined on the basis
of 'rule of thumb' method. Rather scientific methods should be used. To determine
standard of performance scientifically, Taylor introduced his famous study known
as time-motions involved in performing a particular task. Taylor, then found ways
enabling workers to complete their job on time and avoiding unnecessary motions.
He finally determined the best method of performing Job.

2. The differential and piece rates wage payment systems

Under this payment systems, there are two rates of wage payment: differential and
piece rates. The piece rate is normally less than differential rate and it was applied to
workers who had produced out- put below the standard. The differential rate was
applied for workers who had produced an output just to the standard or above the
standard.
Example: standard of performance = 30 units
Piece rate = 0.5 Birr
Differential rate = 1 Birr

Page 2
 Case 1: if the worker produced less than 30 Units, he would be paid on the basis
of piece rate (0.5 Birr). Let say 29 units produced = 29x0.5 = 14.5 Birr
Case 2: if the worker produced 30 units or more, he would be paid on the basis of
differential rate (1 Birr). Let say 31 units produced= 31x1=31 Birr

3. Responsibilities of management

According to Taylor's philosophy, responsibility of management should be clearly

separated from other non-management workers'.He determined responsibilities of
management.
These included:
 Studying each element of worker's job and developing scientific method of doing
them.
 Scientifically selecting, training and developing workers to the method developed.
 Heartily cooperating with workers to make sure that workers were doing their
jobs according to scientifically developed management
 Management should divide and take over all the jobs that it thought could fit
better than other workers and these responsibilities include planning, organizing ,
and directing.

4. Specialization of functional foremanship

During Taylor’s time, workers were planning their own jobs. Taylor believed that this
had led them to inefficiency. Instead, he recommended the separation of planning from
doing the jobs. He said there must exist different functional specialists who would give
supervision for workers while they were doing their jobs. Therefore, workers could
increase efficiency since they did not waste time on planning.

5. Mental Revolution
The scientific method of determining standards, the elimination of unnecessary
movements in workers' job and the use of differential wage rate payment systems
could lead to increase in output and worker's payment, according to Taylor. If output
increased, management would be happy with workers and if wage payments
increased, workers would be happy to management and conflict between management
and workers could be solved.

Principles of Scientific Management Theory

1. Management should develop scientific methods by which workers could do their
jobs.
2. Management should scientifically select, train, teach and develop each worker.
3. Management should cooperate with the workers in ensuring that all of the work is
done in accordance with the principles of scientific management.
4. Management should divide work responsibility between management and non-
management workers with fitness assumptions.

Page 3
 Contributions of Scientific Management Theory

 Demonstrated the importance of compensation for better performance.

 Indicated the importance of personnel selection, training-etc
 Developed management principles which have an application in modern
management system.
Limitations of Scientific Management Theory
 Assumed that workers were motivated only by monetary reward.
 Concentrated only on how to increase efficiency of workers separately with
out giving emphasis on how to manage the entire organization as a whole.
 The fact that workers were receiving instructions from several functional
foremen could confuse workers.
 Considered workers as machines.

B. Classical Organization Theory

Scientific management theory emphasized on how to increase productivity of individual

worker and the management of work. However, the classical organizational theory, also
called administrative management theory, was aiming at administration of entire
organization. Henry Fayol, Follet and James D. Mooney were among the great
contributors to the theory.

Fayol's Proposal

Henry Fayol was a French man who had served a mining company as a president for
many years. He was interested in administrative side of operations in an
organization. In particular, he was concerned with the fact that different abilities
were needed as one moved up the management ranks. His experience led him to
conclude that there were five basic functions of administration: planning, organizing,
commanding, coordinating and controlling. He also set forth a series of
administrative principles, which could be used as flexible guide lines for managing
both people and work.

Fayol's 14 principles
Fayol believed that these principles were essential to increase the efficiency of
management process. The principles are:

1. Division of labor-work specialization could result in efficiency.

2. Authority and responsibility-Authority of a person should always be equal to
his/ her responsibility.
3. Discipline- all workers and managers of a given organization should respect a
discipline which governs that organization. No organization could prosper
with out discipline.
4. Unity of command- every one should have one and only one boss.

Page 4
 5. Unity of direction-each group of activities with the same objective must have
one head and one plan.
6. Equity- every one in an organization should be treated fairly and justly.
7. Order- a place should exist for everything and every thing should be in its
place.
8. Subordination of individual to general interest-the goals of organization and
departments should take priority over the goals of individual employees.
9. Remuneration of personnel- compensation should be fair both to employees
and to employers to motivate them to do good work.
10. Centralization- organizations tend to keep within limits much of decision-
making authority to the upper levels. Instead, they should seek the balance of
centralization- decentralization that provides the greatest overall efficiency.
11. Scalar chain- there should be a clear-cut chain of command running from the
top of the organization to the bottom.
12. Stability of tenure personnel- reducing turn over of personnel will result in
more efficiency and fewer expenses.
13. Initiative- people should be allowed the freedom to propose and execute ideas
at all levels of an enterprise
14. Esprit de corps- In unity there is strength. Managers should promote harmony
and discourage or avoid those things that disturb harmony.

Contributions of Classical Organization or Administrative Theory

i. Demonstrated the importance of different skills at different levels of

management for managers
ii. Systematically identified functions of management
iii. Developed several important principles of management

Limitation of Classical Organization

i. Assumed several difficult principles which are difficult to apply in management
of modern organizations.

2. Neo-classical Theory

Neo classical theory was built on the basis of classical theory. It modified, improved
and extended the classical theory.

Behavioral or Human Relation Approach

The behavioral theory of management has partly emerged because the classical
theorists failed to raise productivity and work place harmony although they had made a
lots of attempts. Behavior school recognized employees as individuals with concrete
human need, as apart of work groups, and as a member of large society. It focused on
human dimension of an organization.

Elton Mayo, an Australian psychologist, pioneered the human relations improvement.

He headed a group of researchers in conducting the How throne studies. The objective of

Page 5
the behavioral theorists was to identify factors that will serially affect productivity of
employees. However, the initial purpose of how throne studies was to determine the
effect of illumination on outputs.

Hawthorne study

The study was conducted at Hawthorne works of western Electric Company in

Chicago, USA. The study had four phases:

 Illumination Experiments
 The relay assembly Test Room Experiment
 The Interviewing program
 The bank wiring observation

Phase I: Illumination Experiment

This initial experiment was designed to study the effect of illumination on out put. But at
the end, the researchers found that there was no as such strong relationship between
levels of out put and that of light. At different levels of light, the output remained
unchanged.to understand these other factors they had conducted a more controlled
experiment and this experiment marked the 2nd phase.

Phase II: The Relay Assembly Test Room Experiment

To obtain control sample, the researchers decided to isolate small group of employees
from the regular work force and study their behavior. Accordingly six women were
selected and made to work in separate room. Different supervisors were assigned to the
women and they were allowed to communicate freely with their supervisors and among
each other . After they adopted new work place, changes in several physical factors had
been made. The changes included rest time, lunchtime, number of working days, number
of working weeks etc. Regardless of these changes, productivity increased. Then the
researchers concluded that productivity was mainly affected by social, psychological and
nature of supervisions used. To get more information whether these factors were
affecting productivity the researchers decided to assess attitude of employees through
interviewing program which led to third phase of the study.

Phase III: The Interviewing Program

During this phase, more than 20,000 interviews were conducted. The employees were
asked about factors that might affect levels of their productivity. Finally, the interviewers
had the importance of other important factor from the interview, i.e., informal groups in
an organization remained significant factor that affected the workers. To understand this
factor in better way they had conducted 4th phase study.

Phase IV: The Bank Wiring Observation Room Study

The researchers decided to study a small group at work and they chose to study the bank
wiring room, where workers were wiring and soldering bank terminals. After studying
behavior in the room for an extended time period, they had realized the workers' actions
were affected by many behavioral norms, which include factors like- individuals with

Page 6
 whom they were given job or to whom they offered assistance. So informal groups
affected strongly the performance of individuals by creating even standards of
performance which were greater than standards set by management.

Hawthorne effects (conclusions)

From studies conducted at Hawthorne researchers concluded:

 Individual workers could not be treated in isolation, but must be seen as members
of groups
 Employee motivation was based not only on the satisfaction of physical needs but
also social and psychological needs
 Democratic style of leadership is important for employees' satisfaction.
 Informal groups were important in organizational work environment.
Contributions of Behavioral/Human Relations Theory
 Demonstrated the social context of organization
 Found out that the satisfaction of social and psychological needs could result in
more performance of workers.

Limitations of Behavioral (Human Relations Theory)

 Failed of develop an integrated theory of management as it
followed only the basic background laid by classical theorists.
 The style was unethical as they used human beings as
experimental units in laboratory.

3. Modern Approach
This approach is the last approach
It consists of:
A. the systems approach
B. The contingency approach

A. The System Approach

System- is a group of interrelated and interdependent parts working together to
attain one common objective. Systems obtain input from the environment, process
the inputs and provide outputs to the environment it can be shown
Inputs process out put
raw materials, human methods, techniques goods, service
resources, finance, decisions, actions etc customer satisfaction,
technology, information employee satisfaction,
etc. etc.

Feed back

Page 7
Characteristics of systems

A system has several distinguishing features

i. A system can be open or closed

ii. System has boundary
iii. System has subsystems
iv. Failure in one subsystem can be considered as failure of the entire
system
i. A system can be open or closed
 Open system: is a system, which interacts with its external
environment to survive. It is 'dependent' system as it must
obtain inputs from its environment to attain its objective
 Closed system: is a system, which is self-contained and thus not
affected by changes that occur in its external environment. It
doesn't interact with external environment or interacts much less
thus it is 'independent'
ii. A system has boundary

System's boundary is a set of activates with which the system is distinguished from other
system. It is not related with the physical landmark. A boundary of open system is
permeable and flexible compared with boundary of closed system.

iii. A system has subsystems

Subsystem refers to set of related parts that make-up the whole system. A
subsystem can be system and a system can also be subsystem.
iv. Failure in one subsystem can be considered as the failure of entire system.
As the subsystems of a system are highly interdependent failure in one may cause
failure in other subsystems which can result in total system failure.
 Entropy-is system principle which says that systems will die out unless they
communicate with their environment.
 Synergy_ is principle which can be stated as the whole is greater than the
sum of its parts.

In organization context, it means that organizational elements will be more productive if

they work together rather than working separately (or individually). Responsibility of
management, according to system theory, is to keep a balanced relationship between
different parts of relationship and make its organization have smooth relationship with its
environment.

Page 8
B/ Contingency Theory

The contingency theory of management was emerged in 1970's. It was built on the main
premises of systems theory which says that organization is an open and organic system.
According to contingency theory, since organization is an open and organic system, it is
attached by several external environment factors. Because these factors in environment
change rapidly it is not right to insist on only one way of managing an organization.
Therefore, it rejected the idea of one best way of managing. Instead, it supported
situational management style. Contingency theory is also known as situational approach
because it focused on the idea that supports all methods of management could be good
based on the situations in external environment and there is no one method of
management which is always right.

Page 9