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Chapter 2
The Evolution of
Management Thought

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reproduction or further distribution permitted without the prior written consent of McGraw Hill.
 Learning Objectives 1

1. Describe how the need to increase organizational

efficiency and effectiveness has guided the
evolution of management theory.
2. Explain the principle of job specialization and
division of labor, and tell why the study of
person⎼task relationships is central to the pursuit
of increased efficiency.
3. Identify the principles of administration and
organization that underlie effective organizations.

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 Learning Objectives 2

4. Trace the change in theories about how

managers should behave to motivate and control
employees.
5. Explain the contributions of management science
to the efficient use of organizational resources.
6. Explain why the study of the external environment
and its impact on an organization has become a
central issue in management thought.

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 Figure 2.1 The Evolution of Management
Theory

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 Job Specialization and the Division of
Labor 1

Adam Smith (18th-century economist):

• Smith found that the performance of the factories
in which workers specialized in only one or a few
tasks was much greater than the performance of
the factory in which each worker performed all 18
pin-making tasks.

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 Job Specialization and the Division of
Labor 2

Job specialization:
Process by which a division of labor occurs as
different workers specialize in different tasks over
time.
• Factory lines.

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 F.W. Taylor and Scientific Management
Scientific management:
• The systematic study of the relationships between
people and tasks for the purpose of redesigning
the work process to increase efficiency.

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 Principles of Scientific Management 1

1. Study the way workers perform their tasks, gather

all the informal job knowledge that workers
possess, and experiment with ways of improving
how tasks are performed.
2. Codify the new methods of performing tasks into
written rules and standard operating procedures.

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 Principles of Scientific Management 2

3. Carefully select workers who possess skills and

abilities that match the needs of the task, and
train them to perform the task according to the
established rules and procedures.
4. Establish a fair or acceptable level of
performance for a task, and then develop a pay
system that provides a reward for performance
above the acceptable level.

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 Problems with Scientific Management
Many workers experiencing the reorganized
work system found that as their performance
increased, managers required that they do
more work for the same pay.
Scientific management brought many workers
more hardship than gain and a distrust of
managers who did not seem to care about
workers’ well-being.

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 The Gilbreths
Frank and Lillian Gilbreth, followers of Taylor:
1. Analyze every individual action necessary to
perform a particular task and break it into each of
its component actions.
2. Find better ways to perform each component
action.
3. Reorganize each of the component actions so
that the action as a whole could be performed
more efficiently at less cost in time and effort.

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 Administrative Management Theory 1

Administrative management:
The study of how to create an organizational
structure and control system that leads to high
efficiency and effectiveness.
• Max Weber.
• Henri Fayol.

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 Administrative Management Theory 2

Max Weber:
• Developed the principles of bureaucracy as a
formal system of organization and administration
designed to ensure efficiency and effectiveness.

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 Administrative Management Theory 3

Authority:
The power to hold people accountable for their
actions and to make decisions concerning the use
of organizational resources.
• Hierarchy in the FBI, CIA.

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 Figure 2.2 Weber’s Principles of
Bureaucracy

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 Administrative Management Theory 4

Rules:
Formal written instructions that specify actions to be
taken under different circumstances to achieve
specific goals.
• If ”A” happens, then do “B”; at the end of the workday,
employees are to leave their machines in good order.

Standard operating procedures (SOPs):

Specific sets of written instructions about how to
perform a certain aspect of a task.
• Which parts of a machine must be oiled or replaced.

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 Administrative Management Theory 5

Norms:
Unwritten, informal codes of conduct that prescribe
how people should act in particular situations and
are considered important by most members of a
group or an organization.
• Restaurant waiters should help each other if time permits.

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 Table 2.1 Fayol’s Principles of
Management 1

Principle Description

Division of labor Job specialization and the division of labor should increase
efficiency, especially if managers take steps to lessen
workers’ boredom.
Authority and responsibility Managers have the right to give orders and the power to
exhort employees for obedience.
Unity of command An employee should receive orders from only one superior.

Line of authority The length of the chain of command that extends from the
top to the bottom of an organization should be limited.
Centralization Authority should not be concentrated at the top of the chain
of command.
Unity of direction The organization should have a single plan of action to guide
managers and workers.
Equity All organizational members are entitled to be treated with
justice and respect.
Order The arrangement of organizational positions should
maximize organizational efficiency and provide employees
with satisfying career opportunities.

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 Table 2.1 Fayol’s Principles of
Management 2

Principle Description

Initiative Managers should allow employees to be innovative and

creative.
Discipline Managers need to create a workforce that strives to achieve
organizational goals.
Remuneration of personnel The system that managers use to reward employees should
be equitable for both employees and the organization.
Stability of tenure of Long-term employees develop skills that can improve
personnel organizational efficiency.
Subordination of individual Employees should understand how their performance affects
interests to the common the performance of the whole organization.
interest
Esprit de corps Managers should encourage the development of shared
feelings of camaraderie, enthusiasm, or devotion to a
common cause.
Initiative Managers should allow employees to be innovative and
creative.
Discipline Managers need to create a workforce that strives to achieve
organizational goals.

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 Behavioral Management Theory 1

Behavioral management:
• The study of how managers should behave to
motivate employees and encourage them to
perform at high levels and be committed to the
achievement of organizational goals.

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 Behavioral Management Theory 2

Mary Parker Follett:

• Concerned that Taylor ignored the human side of
the organization.
• Suggested workers help in analyzing their jobs.
• Suggested if workers have relevant knowledge of
the task they should be in control of the work
process.

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 The Hawthorne Studies and
Human Relations 1

The Hawthorne studies looked at how the

characteristics of the work setting affected
worker fatigue and performance at the
Hawthorne Works of the Western Electric
Company from 1924 to 1932.
• Worker productivity was measured at various
levels of light illumination.
• Mayo’s relay assembly test experiments.

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 The Hawthorne Studies and
Human Relations 2

Hawthorne effect:
• Workers’ performance affected by their attitudes
about their managers.
• Led to the human relations movement.

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 The Hawthorne Studies and
Human Relations 3

Human relations movement:

• A management approach that advocates the idea
that supervisors should receive behavioral training
to manage employees in ways that elicit their
cooperation and increase their productivity.

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 The Hawthorne Studies and
Human Relations 4

Behavior of managers and workers in the

work setting is as important in explaining the
level of performance as the technical
aspects of the task.
Demonstrated the importance of
understanding how the feelings, thoughts,
and behavior of work-group members and
managers affect performance.

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 The Hawthorne Studies and
Human Relations 5

Informal organization:
• The system of behavioral rules and norms that
emerge in a group.

Organizational behavior:
• The study of the factors that have an impact on
how individuals and groups respond to and act in
organizations.

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 Theory X and Theory Y 1

Douglas McGregor proposed two different

sets of assumptions about workers.
Theory X:
A set of negative assumptions about workers that
leads to the conclusion that a manager’s task is to
supervise workers closely and control their behavior.
• Assumes the average worker is lazy, dislikes work, and will
try to do as little as possible.

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 Theory X and Theory Y 2

Theory Y:
A set of positive assumptions about workers that
leads to the conclusion that a manager’s task is to
create a work setting that encourages commitment
to organizational goals and provides opportunities
for workers to be imaginative and to exercise
initiative and self-direction.
• Assumes workers are not inherently lazy, do not naturally
dislike work, and will do what is good for the organization.

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 Figure 2.3: Theory X versus Theory Y
THEORY X THEORY Y
The average employee is lazy, Employees are not inherently lazy.
dislikes work, and will try to do as Given the chance, employees will do
little as possible. what is good for the organization.
To ensure that employees work To allow employees to work in the
hard, managers should closely organization’s interest, managers must
supervise employees. create a work setting that provides
Managers should create strict work opportunities for workers to exercise
rules and implement a well-defined initiative and self-direction.
system of rewards and Managers should decentralize authority
punishments to control employees. to employees and make sure
employees have the resources
necessary to achieve organizational
goals.

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 Example: Southwest Airlines 1

Southwest’s leadership cites their Theory Y culture

as a driving force.
Inspired by co-founder and former C EO, Herb
Kelleher, Southwest Airlines emphasizes a culture of
fun, creativity, and camaraderie.
Southwest employees note how Kelleher maintained
an open-door policy of contact, which enabled him
to stay in touch with problems facing the airline and
to find solutions faster.

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 Example: Southwest Airlines 2

Southwest’s leadership cites their Theory Y culture

as a driving force.
Inspired by co-founder and former C EO, the late
Herb Kelleher, Southwest Airlines emphasizes a
culture of fun, creativity, and camaraderie.
Southwest employees noted how Kelleher
maintained an open-door policy of contact, which
enabled him to stay in touch with problems facing
the airline and to find solutions faster.

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 Management Science Theory 1

Management science theory:

• Contemporary approach to management that
focuses on the use of rigorous quantitative
techniques to help managers make maximum use
of organizational resources to produce goods and
services.

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 Management Science Theory 2

Quantitative management:
Utilizes mathematical techniques, like linear
programming, modeling, simulation, and chaos theory.
• Inventory management practices. New factory locations.

Operations management:
Gives managers a set of techniques they can use to
analyze any aspect of an organization’s production
system to increase efficiency.
• How to acquire raw materials and distribute finished
products more efficiently.

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 Management Science Theory 3

Management information systems:

Give managers information about events occurring
inside the organization as well as in its external
environment—information that is vital for effective
decision making.
• Toyota Production System (TPS).

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 Organizational Environment Theory
Organizational environment:
The set of forces and conditions that operate
beyond an organization’s boundaries but affect a
manager’s ability to acquire and utilize resources.
• Raw materials to produce goods.

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 The Open-Systems View 1

Open system:
• A system that takes resources for its external
environment and transforms them into goods and
services that are then sent back to that
environment where they are bought by
customers.

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 The Open-Systems View 2

Figure 2.4 The Organization as an Open System

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 The Open-Systems View 3

Input stage:
• The organization acquires resources such as raw
materials, money, and skilled workers to produce
goods and services.
Conversion stage:
• Inputs are transformed into outputs of finished goods
and services.
Output stage:
• Finished goods are released to the external
environment.

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 The Open-Systems View 4

Closed system:
A self-contained system that is not affected by
changes in its external environment.
Likely to experience entropy:
• The tendency to lose its ability to control itself and, thus,
dissolve and disintegrate.

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 The Open-Systems View 5

Synergy:
The performance gains that result from the
combined actions of individuals and departments.
Possible only in an organized system.
• Teams composed of people from various departments in
decision making.

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 Contingency Theory
• Contingency theory is the idea that the
organizational structures and control systems
managers choose depend on characteristics of the
external environment in which the organization
operates.
• “There is no one best way to organize.”
• Rapidly changing environments create a greater
need for managers to respond quickly and
effectively.

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 Figure 2.5 Contingency Theory of
Organizational Design

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 Type of Structure 1

Mechanistic structure:
An organizational structure in which authority is
centralized, tasks and rules are clearly specified,
and employees are closely supervised.
Most efficient in a stable environment.
• McDonald’s Restaurants.

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 Type of Structure 2

Organic structure:
An organizational structure in which authority is
decentralized to middle and first-line managers, and
tasks and roles are left ambiguous to encourage
employees to cooperate and respond quickly to the
unexpected.
Most efficient in a rapidly changing environment.
• Google, Apple, 3M.

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 Dynamic Capabilities 1

Organizations have the ability to build,

integrate, and reconfigure processes to
address rapidly changing internal and
external environments.
These capabilities are unique to each
organization.

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 Dynamic Capabilities 2

Sensing:
Identifying and assessing opportunities outside the
company.
• Steve Jobs recognizing consumers need for smaller, more
attractive mp3 players.

Seizing:
The action of mobilizing company resources to
capture value for the organization.
• Producing Apple’s iPod, a sleek alternative to competitive
products.

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 Dynamic Capabilities 3

Transforming:
Organization’s ability to continue making changes as
needed to maintain success.
• Organizational shift to expand computer product line to
include consumer electronics, digital music streaming.

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No reproduction or further distribution permitted without the prior written consent of McGraw Hill.