Evolution of Management Theory

This part of the review describes how the need to increase organizational efficiency and
effectiveness has guided the evolution of management theory from the pre-classical to the
contemporary viewpoint, in particular the Total Quality Management (TQM) and the Quality
Control Circles (QCC) movement. The evolution of management theory is shown in Figure 1.

Organizational Environment Theory

Management Science Theory

Behavioral Management Theory

Administrative Management Theory

Scientific Management Theory

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2011

Figure 1.
Evolution of management theory

Today’s management theory is the result of the interdisciplinary efforts of many people.

The beginning of contemporary or modern organization occurred during the middle of the
th
19 century with the emergence of the factory system, especially in the textile and automotive
industry, where automation and mass production became the foundation of productivity. During
the century, however, the evolution of management thinking was slow. Thus, the need to define
what management thinking was at the first instance and to operationalize its meaning in the
organization. There were three prominent management theorists that took up this challenged and
become known as the Pre-Classicists of management thought.

Pre-classicists

Robert Owen (1771-1858).

Robert Owen developed a strong sense of interest in the welfare of the 400-500 child
employees of his cotton mill in New Lanark, Scotland. He spearheaded a legislative movement
to limit child employment to those over the age of 10 while reducing the workday to 10½ hours.

In 1813 Owen published a pamphlet, A New View of Society, describing his vision of
society. He became active in improving living conditions of employees by implementing
improvements in housing, sanitation, public works, and establishing schools for children. Owen
strongly believes that character is a product of circumstances; that environment and early
education are critical in forming a good character. Also, Owen is credited with being the
forerunner of the modern human relations school of management.

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 Charles Babbage (1792-1871).

Charles Babbage is a noted mathematician and considered as the “father of modern

computing” considering his research and development works for the practical mechanical
calculator and “analytical engine.” His interests in management are largely the result of his
concerns with work specialization or the degree to which work is divided into its parts, which is
the foundation of contemporary operations research.

His other major contribution in management came from the development of modern
profit-sharing plan including employee bonus for useful suggestions and a share of the
company’s profits.

Henry E. Towne (1844-1924).

Henry E. Towne is an American mechanical engineer and businessman that called for the
establishment of a science of management and the development of management principles that
could be applied across management situations.

Towne’s famous work is the development of the Towne-Halsey plan, which according to
Frederick W. Taylor’s book Shop Management, consists of recording the quickest time in which
a job has been done, and fixing this as a standard. If the workman succeeds in doing the job in a
shorter time, s/he is still paid the same wages per hour for the time s/he works on the job, and in
addition, is given a premium for having worked faster, consisting of from one-quarter to one-half
the difference between wages earned and the wages originally paid when the job was done in
standard time.

Today, we know this as the “quota” system and “piece-rate” system. In the local
parlance, we call it the “pakyaw” system and “piece-rate” system.

An assessment of the pre-classicist contributions indicates that their efforts were

fragmented. By and large they applied their efforts towards developing specific techniques or
solutions for a particular problem or issue. Nonetheless, they laid the groundwork for major
management theories that came later (http://mbazainbooks.com; Retrieved 6th June 2011).

The classical school

It was during the 20th century that witnessed a period of tremendous excitement and
activity on calls for the development of comprehensive management theory, which focus to
improving the management effectiveness in organizations.

The classicists of this school of thought went a step further by not only developing a
comprehensive theory of management, but also providing tools a manager required for dealing
with their organizational challenges.

Within the classical school there are scientific, bureaucratic, and administrative branches.

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 Scientific management.

The classicists in this school of thought emphasized empirical research for developing a
comprehensive management solution. Scientific management principles are to be applied by
managers in a very specific fashion. The basic premise of scientific management is that
increasing an organization’s productivity is the primary responsibility of the manager. The major
classicists in this school of thought are Frederick W. Taylor and Frank and Lillian Gibreth.

Frederick Winslow Taylor (1856-1915).

Frederick W. Taylor is known as the “father of scientific management.” At age 18,

Taylor started work as apprentice to a pattern-maker, and as a machinist. He became chief
engineer after eight years as laborer at Midvale Steel Company. It was during this period that he
performed exhaustive experiments on worker productivity and tested his “task system” that later
evolved into the Taylor System and eventually progressing into scientific management. The
experiments involved determining the best way of performing each work operation, the time
required, materials needed, and the work sequence. He also sought to establish a clear division of
labor between management and employees.

Taylor’s task management methodology is anchored on the basic principle that

management, the entrepreneurs at that time, was not only superior intellectually to the average
employee, but had a positive duty to supervise them and organize their work activities.

In 1911, Taylor’s paper The Principles of Scientific Management, which was originally
prepared for presentation to the American Society of Mechanical Engineers (ASME) was
published. He positioned scientific management as the best management approach for achieving
productivity increases. It rested on the manager’s superior ability and responsibility to apply
systematic knowledge to the organizational work setting.

Taylor’s four principles of scientific management are:

1. Study the way workers perform their tasks, gather all the informal job knowledge that
workers possess, and experiment with ways of improving the way tasks are
performed.
2. Codify the new methods of performing tasks into written rules and standard operating
procedures.
3. Carefully select workers so that they possess the 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.

Scientific management consisted of a system for supervising employees, improving work

methods wherein tasks were standardized as much as possible, and providing incentives and
rewards including punishment to employees through the piece rate system. This approach,

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however, appeared to work well for organizations with assembly lines and other mechanistic,
routine activities.

Taylor’s Principles became popular within America and in Europe especially after
defending it before the American Congress. It later let to time and motion studies, efficiency
experts, most notable of which is the husband and wife team of Frank and Lillian Gilbreth
(http://iris.nyit.edu; Retrieved on 6th June 2011).

Frank (1868-1924) and Lillian (1878-1972) Gilbreth.

I reckon that Frank and Lillian Gilbreth, the two prominent followers of Taylor, were the
epitome of productivity during their time, literally for having 12 children. Their attempts to
develop improved management principles were captured, at times quite humorously, in the
movie Cheaper by the Dozen, which depicts how the Gilbreths with their 12 children tried to live
their own lives according to these efficiency principles and apply them to daily actions such as
shaving, cooking, washing the dishes, and even raising a family.

They refined Taylor’s analysis of work movements and made many contributions to time-
and-motion study, in particular the Therblig Analysis (or “Gilbreth” spelled backwards). After
extensive studies of bricklayers (or masons), Franck was able to reduce the motions in
bricklaying from 18½ to 4. This produced an almost 170% increase in the productivity of the
bricklayer while not increasing the amount of effort needed.

The system was later known as “speed work” and was achieved by eliminating the
unnecessary motions. The husband and wife team became heavily involved in time-and-motion
studies isolating 17 basic work motions that later became known as and still is used by industrial
engineers, the therbligs. Their studies of work included the use of a cyclograph, a form of
stereoscopic movie cameras, where the time and motions of a works is captured and then
carefully studied (http://highered.mcgrawhill.com; Retrieved 6th June 2011).

Bureaucratic management.

Max Weber (1864-1920).

At the turn of the 20th century when Germany was undergoing its own industrial
revolution, Max Weber developed the principles of bureaucracy, that is, a formal system of
organization and administration designed to ensure efficiency and effectiveness. He constructed
a “rational-legal authority” model of an ideal type bureaucracy, which rested on a belief in the
“legality” of patterns of normative rules and the right of those elevated to authority to issue
commands (legal authority). Weber postulated the rules and regulations of a bureaucracy serve to
insulate its members against the possibility of personal favoritism.

A bureaucratic system of administration is based on five principles shown in Figure 2 and

explained as follows:

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 System of written rules and standard
operating procedures that specify
how employees should behave.

Clearly specified system of task Clearly specified hierarchy of

A bureaucracy should have a:
and role relationships. authority.

Selection and evaluation system that

rewards employees fairly and
equitably.

Figure 2.
Weber’s principles of bureaucracy

Principle 1. In a bureaucracy, a manager’s formal authority derives from the position

s/he holds in the organization. Authority is the power to hold people accountable for their actions
and make decisions concerning the use of organizational resources. With this, managers are
given the rights to direct and control their subordinates’ behavior to achieve organizational
objectives. Obedience is accorded to a manager, not because of any personal qualities, wealth, or
social status, but because the manager occupies a position that is associated with a certain level
of authority and responsibility.

Principle 2. In a bureaucracy, people should occupy positions because of their

performance not because of their social standing or personal contacts. This principle was not
always followed in Weber’s time and is often ignored today the world over, especially by the
politicians that has the power to appoint people in key government positions. There are still some
organizations and industries that are affected by social networks in which personal contacts and
relations, not job-related skills, influence hiring and promotional decisions.

Principle 3. The extent of each position’s formal authority and task responsibilities, and
its relationship to other positions in an organization, should be clearly specified. It is when tasks
and authority associated with various positions are clearly specified, managers and workers
know what is expected of them and what to expect from each other. And, the organization can

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hold all its employees strictly accountable for their actions when each person is completely
familiar with his/her responsibilities.

Principle 4. So that authority can be exercised effectively in an organization, positions

should be arranged hierarchically, so employees know whom to report to and who reports to
them. Managers must create an organizational hierarchy of authority that clearly defines who
reports to whom and to whom managers and workers go if conflicts and problems arise. It is vital
that managers at high levels of the hierarchy be able to hold subordinates accountable for their
actions.

Principle 5. Managers must create a well-defined system of rules, standard operating

procedures, and norms so that they can effectively control behavior within an organization.
Rules are formal written instructions specifying action to be taken under different circumstances
to achieve specific goals (e.g., if “A” happens, do “B”). Standard operating procedures (SOPs)
are specific sets of written instructions about how to perform certain aspect of a task. A rule
might state that employees, at the end of each workday, are to leave their table and work area
clean, and a set of SOPs then specifies exactly how they should do so, itemizing hard copies of
files and documents are secured and locked in cabinets or drawers, computers shut down, and
waste papers are shredded. Norms are unwritten, informal codes of conduct that prescribe how
people should act in particular situations. For example, an organizational norm in an office might
permit or allow workers to comment on each other’s work.

Weber believed that organizations implementing all five principles will establish a
bureaucratic system that will improve organizational performance. The specification of positions
and the use of rules and SOPs to regulate how tasks are performed make it easier for managers to
organize and control the work of subordinates. In the like manner, fair and equitable selection,
and promotion systems improve managers’ feelings of security, reduces stress, and encourage
organizational members to act ethically and further promote the organization’s interests.

Sometimes, managers allow rules and SOPs to become cumbersome or institute too much
control resulting in what we know as “bureaucratic red-tape.” When managers rely too much on
rules to solve problems and not enough on their own skills and judgment, their behavior becomes
inflexible. A key challenge for managers is to use bureaucratic principles to benefit, rather than
harm, an organization (http://highered.mcgrawhill.com; Retrieved 6th June 2011).

Administrative management.

Henri Fayol (1841-1925).

Working at the same time but independently of Weber, Fayol spent his entire career from
apprentice to become CEO of Commentary-Four chambault or Commambault Mining Company.
Fayol strongly believed management theories could be developed and taught to others. He
identified 14 principles, shown in Table 1, that are essential to increasing the efficiency of the
management process. Although some of the principles Fayol outlined have faded from
contemporary management practices, most have endured.

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 The principles of Fayol and Weber still provide a clear and appropriate set of guidelines
that managers can use to create conducive work setting that makes efficient and effective use of
organizational resources. These principles still remain the foundation of modern management
theory; recent researches have refined or developed them to suit the present day conditions.

PRINCIPLE EXPLANATION
Job specialization and the division of labor should increase efficiency, especially if
1. Division of labor
managers take steps to lessen workers’ boredom.
Managers have the right to give orders and the power to exhort subordinates for
2. Authority and responsibility
obedience.
3. Unity of command An employee should receive orders from only one superior.
The length of the chain of command that extends from the top to the bottom or
4. Line of authority
an organization should be limited.
5. Centralization Authority should not be concentrated at the top of the chain of command.
The organization should have a single plan of action to guide managers and
6. Unity of direction
workers.
7. Equity All organizational members are entitled to be treated with justice and respect.
The arrangement of organizational positions should maximize organizational
8. Order
efficiency and provide employees with satisfying career opportunities.
9. Initiative Managers should allow employees to be innovative and creative.
10. Discipline Managers need to create a workforce that strives to achieve organizational goals.
The system that managers use to reward employees should be equitable for both
11. Remuneration of personnel
the employees and the organization.
12. Stability of tenure of personnel Long-term employees develop skills that can improve organizational efficiency.
13. Subordination of individual Employees should understand how their performance affects the performance of
interests to the common interest the whole organization.
Managers should encourage the development of shared feelings and
14. Esprit de corps
comradeship, enthusiasm. Or devotion to a common cause.

Table 1.
Fayol’s 14 principles of management

Chester Barnard (1886-1961).

Chester Barnard like Fayol led a highly successful management career rising to the post
of President of New Jersey Bell Telephone Company. Barnard basically feels that organizations
are communication systems such that it is important for managers to develop a sense of common
purpose where a willingness to cooperate is strongly encouraged. He is credited for developing
the acceptance theory of management that emphasizes the willingness of people to accept those
having authority to act. Barnard feels the manager’s ability to exercise authority is strongly
determined by the employee’s “zone of indifference” where orders are accepted without undue
question.

As opposed to Weber’s context that communication flows from top to bottom of the
organization, Barnard feels organizational communication flows from bottom to top. He states
there are four factors affecting the willingness of employees to accept authority. These are:

1. The employees must understand the communication.

2. The employees accept the communication as being consistent with the organization’s
purposes.

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 3. The employees feel their actions will be consistent with the needs and desires of the
other employees.
4. The employees feel they are mentally and physically fit to carry out the order from
the higher authority.

Barnard feels informal organizations within formal organizations perform necessary and
vital communication functions for the overall organization. And such is consistent with his belief
that the executive’s main organizational function is acting as a channel of communication and
maintaining the organization in operation.

The sympathy for and understanding of employee needs of Barnard in the dynamics of
the organizational communication process positions him as a bridge to the behavioral school of
management; many of whose early members were Barnard’s contemporaries (http://iris.nyit.edu;
Retrieved 6 June 2011).

The behavioral movement

During the first half of the 20th century, behavioral management scientists all espoused a
theme that focused on how managers should personally behave in order to motivate employees
and encourage them to perform at high levels and be committed to the achievement of
organizational goals.

As management research continued in the 20th century, questions were increasingly

raised regarding the interactions and motivations of the individual in organizations. Curiously,
an experiment, the Hawthorne experiment, rigorously applied classical management theory only
to reveal its shortcomings. The behavioral school was a natural outgrowth of this revolutionary
management experiment.

Behavioral view.

Mary Parker Follett (1868-1933).

Mary Parker Follett is the female version of F.W. Taylor. Much of her writings on
management were basically responses to Taylor’s ignoring the human side of the organization.
She pointed out that management often overlooks the multitude of ways in which employees can
contribute to the organization when managers allow them to participate and exercise initiative in
their everyday work.

Follett strongly believes in the inherent problem solving ability of people working in
groups and asserts power should be cooperatively shared for the purpose of resolving conflict.
She proposed that, “Authority should go with knowledge … whether it is up the line or down.”
Simply put, if workers have the relevant knowledge, then workers, rather than managers, should
be in control of the work process itself, and managers should behave as coaches and facilitators -
-- not as monitors and supervisors.

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 In making such statement, Follett anticipated the current interest in self-managed teams
and empowerment; and, recognized the importance of having managers in different departments
communicate directly with each other to speed decision making. She advocated the concept of
“cross-functioning” wherein members of different departments working together in cross-
departmental teams to accomplish projects (http://highered.mcgrawhill.com/; Retrieved 6th June
2011).

The Hawthorne experiments.

Conducted at the Hawthorne Works of Western Electric Company in Chicago from 1924
to 1932, the Hawthorne Experiments consists of two studies.

The initial study in 1924 was conducted by a group of engineers seeking to determine the
relationship of lighting levels to worker productivity. The results are extremely interesting since
worker productivity increases as the lighting levels decrease until the employees are unable to
see what they are doing after which performance naturally declines.

In 1927, a second group of experiments commenced with a group of five women in the
bank wiring room. The experimenters, during the course of the study, served as supervisors to
the women. Also, the workers involved in the experimental group are given special privileges
including the right to leave their workstation without permission, rest periods, free lunches, and
variations in pay levels and workdays. The experiment likewise resulted in significantly
increased rates of productivity.

In 1928, Harvard researchers, F.J. Roethlisberger and Elton Mayo, professor of human
relations and industrial research department, respectively, became associated with the second
experimental study. Though the research was extensive, the results were not published until
1939. They conclude the primary determinant of the increase in productivity is the change in the
supervisory arrangement rather than the changes in lighting or other associated worker benefits.
Since the experimenters became the immediate superiors of the employees, the intense interest
they displayed for the workers was the basis for the increased motivation and resulting
productivity.

Essentially the experimenters became part of the study and influenced its outcome. This
is the origin of the term Hawthorne Effect describing the special attention researchers give to a
study’s subjects and the impact it has on its findings. While the Hawthorne studies failed to
answer the specific question of the relation between illumination and worker productivity, the
study did create a strong theoretical foundation for the human relations view of management
(http://iris.nyit.edu/; Retrieved 6th June 2011).

Human relations view.

The works of Follett and the results of the Hawthorne experiments as well as the
criticisms on the classical school led to a deeper consideration of the needs of the employees and
the role of management as provider for those needs. The two major organizational theorists in the
human relations movement are Maslow and McGregor.

Page 9 of 19
 Abraham H. Maslow (1908-1970).

Abraham Maslow was the first psychologist to develop a theory of motivation based
upon a consideration of human needs. The theory has three assumptions, namely: (1) human
needs are never completely satisfied; (2) human behavior is purposeful and is motivated by need
satisfaction; and, (3) that human needs can be classified according to a hierarchical structure of
importance from the lowest to the highest.

Maslow believes the needs hierarchy can be classified into five specific groups as shown
in Figure 3. And, to reach successive levels of the hierarchy required satisfaction of the lower
level needs.

Physiological needs. This need includes the needs necessary for maintaining the basic
human well-being that includes food, clothing, and shelter. These needs become acute and
predominant if any or all of these needs are unsatisfied. Once a need is satisfied, however, such
as thirst, it no longer is a motivator.

Self-
actualization

Esteem needs

Belongingness and love needs

Safety needs

Physiological needs

Figure 3.
Maslow’s hierarchy of human needs

Safety needs. The needs included are the need for basic security, stability, protection, and
freedom from fear. A normal state exists for an individual to have all of these needs generally
satisfied. Else, they become primary motivators.

The belongingness and love needs. Once the first two needs are satisfied and no longer
are motivators, then this need becomes the primary motivator. The individual will strive to
establish meaningful relationships with significant others. Deprivation of the belongingness and
love needs will result in significant personality maladjustment.

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 The esteem needs. An individual must develop self-confidence, but in order to do this, it
is essential for the individual to have adequacy from achieving mastery and competence leading
to the achievement of status, reputation, fame, and glory. This achieves satisfaction of the self-
esteem needs.

The need for self-actualization. On the premise that all the previous needs in the
hierarchy as satisfied, another level of discontent and restlessness on the part of the individual
will soon develop. As the old adage goes, “A musician must make music, an artist must paint, a
poet must write … What a man can be, he must be.”

Douglas McGregor (1906-1964).

McGregor believes there are two basic kinds of managers. The first, McGregor labels as
Theory X and the second as Theory Y. The former has a negative view of employees and
assumes they are lazy, untrustworthy, and incapable of assuming responsibility while the latter
assumes that employees are the other way around. This is illustrated in Table 2.

THEORY X THEORY Y

The average employee is lazy, dislikes work, and will try to Employees are not inherently lazy. Given the chance,
do as little as possible. employees will do what is good for the organization.

To allow employees to work in the organization’s interest,

To ensure that employees work hard, managers should managers must create a work setting that provides
closely supervise employees. opportunities for workers to exercise initiative and self-
direction.

Managers should create strict work rules and implement a Managers should decentralize authority to employees and
well-defined system of rewards and punishments to control make sure employees have the resources necessary to
employees. achieve organizational goals.

Table 2.
McGregors’ Theory X versus Theory Y

McGregor’s Theory X versus Theory Y is appealing to managers and dramatically

demonstrated the divergence in management viewpoints towards employees. It has been
extremely helpful in promoting management understanding of supervisory styles and employee
motivational assumptions (http://iris.nyit.edu/; Retrieved 6th June 2011).

Behavioral research models.

A great deal of behavioral research has been done on organizations attempting to

delineate the best supervisory management models.

Rensis Likert.

Likert conducted empirical studies on the differences between good and bad supervisors
defined or contextualized on the basis of high and low productivity. The research is based on
employee interviews in separate departments in many different organizations where a scale of
feelings is developed, the Likert scale, regarding employee attitudes toward their supervisors.
This was correlated with their productivity.

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 Likert developed a four-level managerial classification system as a result of the research.
The summary is presented in Figure 4.

SYSTEM 1 SYSTEM 2

Organizations rewards are used to motivate employees

Utilizes a supervisory system based primarily on fear and
with some freedom being allowed to comment on
punishment. This results in an authoritarian supervisory
organizational decisions. Managers, however, have the
system where employees are usually not consulted
primary decision making responsibility and employees
concerning major decisions.
must act cautiously.

SYSTEM 3 SYSTEM 4

Organization is the most open and participative and is the

Organizations are more open to employee consultation ideal state managers should strive to achieve. This is
regarding the managerial decision making process and termed the democratic model. The more an
overt managerial threats are avoided. organization’s management approximates this system,
the more productive it will be.

Figure 4.
Likert’s four level managerial classification system

Frederick Herzberg.

Herzberg, on the other hand, performed an empirical study on 200 engineers and
accountants with the objective of determining work situations where the subjects feel highly
satisfied and motivated as opposed to those where the reverse is true.

The research revealed that work itself and achievement and recognition for achievement
are primary motivators and he called it satisfiers or motivators. Factors having a negative
motivation impact on the research subjects are the working conditions, salary, job security,
supervisory models, and the general company management climate. Herzberg called these
factors as hygiene factors or dissatisfiers.

From this, the motivation-hygiene model of management emerged such that employee
motivation is achieved with challenging enjoyable work where achievement, growth,
responsibility, and advancement are encouraged and recognized. The environmental or hygiene
factors, such as poor lighting, ventilation, poor working conditions, low salaries, and poor
supervisor relations, serve as dissatisfiers.

The difference between motivators and hygiene factors is that motivators cause an
employee to develop own internal motivations, whereas hygiene factors can make an employee
unhappy, and dissatisfied, but cannot motive him/her. The job itself is the motivator.

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 David C. McClelland.

McClelland performed research on motivation patterns with the use of the thematic
Apperception Test (TAT) where the subjects writes a descriptive analysis of their individual
reactions from unstructured pictures; then, McClelland determines the motivational state of the
subjects.

Based on this research McClelland developed the Achievement-Motivation theory

consisting of four sets of needs, namely: (1) achievement; (2) affiliation; (3) competence; and,
(4) power.

The first one is a need people have to succeed through overcoming challenges while the
second is similar to Maslow’s belongingness and love needs. The competence need is the desire
to accomplish a job well done, and power is the need to control others and make a difference in
the outcome of a given situation (http://mba.zainbooks.com; Retrieved 6th June 2011).

Contemporary management

Management science theory.

Management science theory is part of the contemporary approach to management that

focuses on the use of hard core quantitative techniques to help managers make maximum use of
organizational resources to produce goods and services. In particular, it is the extension of the
scientific management, which, as developed by Taylor, also took a quantitative approach to
measuring the worker-task mix in order to raise efficiency.

Quantitative management.

This utilizes mathematical techniques such as linear and nonlinear programming,

modeling, simulation, queuing theory, and chaos theory, to help managers decide, for example,
on how much inventory to hold at different times of the year, where to locate a new factory, and
how best to invest an organization’s financial capital.

Operations research.

Operations research is a very important area of study, which traces its roots from the
military to business applications. It combines three broad disciplines of mathematics, computer
science, and business applications. Its use started during the war when the US navy was trying to
determine the depth that charges need to be prior to exploding so that it can inflict heavy damage
to enemy submarines. After the war, it was used in the context of business applications by
employing mathematical models and formulas in determining the best routes for distributing
resources, goods, and services. The greatest application of operations research happened during
the Desert Storm; both in the context of war and business, ensuring that human and non-human
resources are at the places and times they need to be. Today, we know operations research as
supply-chain-management.

Page 13 of 19
 Operations management.

This provides managers with a set of technique they can use to analyze any aspect of an
organization’s production system to increase efficiency.

Organizational environment theory.

The organizational environment is the set of forces and conditions that operate beyond an
organization’s boundaries but affect a manager’s ability to acquire and utilize resources. These
resources refer to human and non-human resources that are required in the production of goods
or services, which in turn are consumed by customers that provide the organization with the
financial resources.

Several management paradigms have emerged that have merged or meshed the various
management schools of thought. This includes the two management theorists W. Edwards
Deming and Peter Drucker. It also includes the systems and contingency frameworks.

W. Edwards Deming.

Deming was the American that helped built and turnaround Japan’s image on the quality
of its products after the war. Deming taught the Japanese the use of sampling method to test for
quality control including teaching them that the best way to lowering production costs is to
improving quality. He espoused the application of statistical quality control to increase and
improve organizational productivity.

Despite being a key figure in Japan and in the Japanese industry, Deming was ignored for
years in the US. His contributions to Japan and the Japanese industry was only acknowledged by
American corporations after he was featured in a television show that highlighted the impact of
the mounting international competition from the Japanese companies and threat to American
businesses. Deming’s 14 points for managers is shown in Table 3.

Peter Drucker.

Drucker is considered as one of the greatest management gurus of the 20th century. His
prowess in writing contributed greatly to management thought, notable among which is the
management-by-objectives (MBO). In the early 1950s, Drucker developed the concept where
strategic management decisions are developed through management and employee interaction
and cooperation.

In MBO, management and subordinate have joint consultations to produce an agreement

on the areas of organizational responsibility, which results in the mutual acceptance and
ownership of organizational goals thereby enhancing communication between the two in the
process.

Page 14 of 19
 1. Create consistency of purpose toward improvement of product and service, with the aim to become competitive, to
stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age, created by Japan. We can no longer live with commonly
accepted styles of American management, either with commonly accepted levels of delays, mistakes, or defective
products.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building
quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost.
5. Improve constantly and forever the systems of production and service to improve quality and productivity, and thus
constantly decrease costs.
6. Institute training on the job.
7. Institute supervision: the aim of supervision should be to help people and machines and gadgets do a better job.
Supervision of management is in need of overhaul, as well as supervision of production workers.
8. Drive out fear, so that everyone may work effectively for the company.
9. Break down barriers between departments. People in research, design, sales, and production must work as a team
to foresee problems of production and use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force which ask for zero defects and new levels of
productivity. Such exhortations only create adversarial relationships. The causes of low productivity belong to the
system, and thus lie beyond the power of the work force.
11. Eliminate work standards that prescribe numerical quotas for the day. Substitute aids and helpful supervision.
12. Remove the barriers that rob the hourly worker of this right to pride of workmanship. The responsibility of
supervisors must be changed from sheer numbers to quality. Remove the barriers that rob people in management
and engineering of their right to pride of workmanship. This means establishment of the annual rating, or merit
rating, and management by objective.
13. Institute a vigorous program for education and retraining.
14. Put everybody in the company to work to accomplish the transformation.
Table 3.
Deming’s 14 points for (U.S.) managers

Drucker has been extremely important to demonstrating the necessity for management to
foster organizational innovation in order to remain competitive because of the new realities of
the international environment of business.

The systems approach.

The systems theory blends many different theories into one common functional system
where all activities of the organization are grouped into processes such as inputs, homeostasis,
parameters, processing, outputs, and feedback.

Systems theorists emphasize that every system has interacting and interrelated
subsystems. And, these systemic interactions with the other systems are continually adapting to
dynamically changing internal and external environmental processes. Systems exist within a
continuum of change.

One of the most influential views of how an organization is affected by its external
environment was developed by Daniel Katz, Robert Kahn, and James Thompson in the 1960s.
They viewed the organization as an open-system, which is a system that takes in resources from
its external environment and converts or transforms them into good and services that are then
sent back to that environment, where they are bought by customers. This view is illustrated in
Figure 5 (http://highered.mcgrawhill.com; Retrieved 6th June 2011).

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 Systems theorists commonly argue that “the parts are more than the sum of the whole.”
They mean that an organization performs at a higher level when its departments work together
rather than separately. Synergy is the resulting gain in performance when individuals and
departments coordinate their actions. The recent interest in using teams comprising of people
from different departments reflects systems theorists’ interest in designing organizational
systems to create synergy and thus increase efficiency and effectiveness.

INPUT STAGE CONVERSION STAGE OUTPUT STAGE

 Raw materials  Machinery

 Goods
 Money and capital  Computers
 Services
 Human resources  Human skills

Organization transforms
Organization obtains inputs Organization releases
inputs and adds value to
from its environment. outputs to its environment.
them.

Sales of outputs allow

organization to obtain new
supplies of inputs.

Figure 5.
The organization as an open system

Contingency theory.

Contingency theory represents another alternative managerial theoretical paradigm that is

similar to the systems theory. The contingency theory was developed in the 1960s by Tom Burns
and G.M. Stalker in the United Kingdom and Paul Lawrence and Jay Lorsch in the US. The
fundamental concept of the contingency theory is that there is no one best way to organize, that
is, the organizational structure and the control systems that managers choose depend on --- are
contingent on --- characteristics of the external environment in which the organization operates.

The characteristics of the environment, according to the theory, affect an organization’s

ability to obtain resources. And, to maximize the likelihood of gaining access to resources,
managers must allow an organization’s departments to organize and control their activities in
ways that will allow them to obtain resources, given the constraints of the particular environment
they face.

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 In short, how managers design the organizational hierarchy, choose a control system, and
lead and motivate their employees is contingent on the characteristics of the organizational
environment, which is shown in Figure 6.

Organizations in stable environments

choose a mechanistic structure
(centralized authority, vertical
communication flows, control
through strict rules and procedures).

Determine the design of an

Characteristics of the
organization’s structure and
environment.
control systems.

Organizations in changing
environments choose an organic
structure (decentralized authority,
horizontal communication flows,
cross-departmental cooperation).

Figure 6.
Contingency theory of organizational design

Japanese management.

Notwithstanding the March 2011 earthquake and tsunami that devastated Japan, a great
deal of writing about Japanese style of management has occurred in recent years. If McGregor
has espoused Theory X and Theory Y, Japan’s William Ouichi has Theory Z and The M-Form
Society.

Because of its ability to successfully increase productivity, the Japanese management

style has earned great respect worldwide. American management, on the contrary, is the culprit
that America’s productivity increase has seriously underperformed that of Japan. Why Japan and
its Japanese management had been so successful? The answer that tops the list is that high level
of trust Japanese management has in its employees.

This level of trust permits Japanese employees to have a great deal of decision making
authority. Japanese management also stresses the concept of intimacy in its managerial
relationships where personal relationships are highly valued, respected, and rewarded.

In the organizational setting, there is a balance between teamwork and individual effort in
a Japanese company, which Ouichi calls M-Form Organization; it is a combination of a large

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decentralized organization where each unit completes with every other unit in order to obtain
budgetary resources based on the earnings while at the same time having to draw up the same
centralized corporate services.

Ouichi also noted that Japanese organizations have a “social memory,” wherein past
efforts of individual employees receive future rewards even though the employees may no longer
be productive. The past contributions provide a form of organizational endowment, which
ensures their loyalty while acting as role model for present employees, that is, similar to that of
Weber’s concept of an organizational “memory.”

Total quality management.

Total Quality Management (TQM) is an approach that organizations use to improve their
internal processes and increase customer satisfaction. This management style, when properly
executed, can lead to decreasing costs related to corrective or preventive measures, better overall
performance, and an increase in the number of happy, satisfied, and loyal customers.

TQM, however, is something that does not happen overnight. While there are abundant
resources on the subject, some basic underlying philosophies that the company must integrate
throughout the organization should be in place, carefully planned, and well adapted. The
following seven principles of TQM can serve as basic foundation for all activities. These are:

1. Quality can and must be managed. Many companies have stumbled in a vicious
repetitive cycle of chaos and customer complaints; they believe that their operation is
too large to effectively manage the level of quality. The first step in the TQM process
is to realize there is a problem and that it can be controlled.

2. Processes, not people, are the problem. If your process is causing problems, it will not
matter how many times you hire new employees or how many training sessions you
put them through. Correct the process and then train your people on these new
procedures.

3. Do not treat symptoms, look for the root cause and cure it. If you just patch over the
underlying problems in the process, you will never be able to full reach your potential
(e.g., if your shipping department is falling behind, you may find that it is because of
holdups in manufacturing). Go for the source to correct the problem.

4. Every employee is responsible for quality. Everyone in the company, from the
workers on the line to the upper management, including the people in the support
units, must realize that they have an important part to play in ensuring high levels of
quality in their products and services. Everyone has a customer to please and delight
(i.e., the next in line), and they must all step up and take responsibility for them.

5. Quality must be measurable. A quality management system is only effective when

you can quantify the results. You need to see how the process is implemented and if it

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 is having the desired effect. This will help you set your goals for the future and ensure
that every department is working toward the same result.

6. Quality improvements must be continuous. TQM is not a one-shot activity such that
once done it can then be forgotten. It is not a management “phase” that will end after
a problem has been corrected. Real improvements must occur frequently and
continually in order to increase customer satisfaction and loyalty.

7. Quality is a long-term investment not an expense. Quality management is not a quick

fix and it is not a one-time expenditure but rather a long-term investment. Thus,
results are not to happen or occur immediately, but with patience and perseverance,
the investment and associated rewards are fulfilling
(http://managementhelp.org/quality/tqm/tqm.htm/; Retrieved 8th June 2011).

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