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Robbins | Bergman | Stagg | Coulter
ETYMOLOGY OF MANAGEMENT
Origin of Management:
The Verb “Manage” comes from the Italian “Maneggiare” it means (“To handle especially tools) with derives from two Latin Words: 1.Manus-> Hand 2. Agree -> To Act: -----To Handle the Situation or task.
The French word Menagerie derived from Ménage. ‘It means to keep house (for Household) or Domestic manage.
Mesanagement it influence the development of in meaning of the English word. Management in the 17th and 18th Century.
Classical School: To Managing workers and Organization more efficiently.
Scientific School: 1880,
Administrative Management: 1940,
Bureaucratic: 1920 to understanding the Org. Behavior.
Human Relations: 1930, and Behavioral science 1950.
Quantitative School: For Decision Making by Maths $Statistics.
Management Science and 1940 and Operation Management.
MIS (Management Information System. 1950’s and 70’.
System School: To understanding that transfer inputs into outputs while in constant interaction with it’ Environment. (1950).
Contingency School: Applying Management Principles and process as by the unique characteristics of each situation. (1960).
Introduction to organizations and management:
we will consider how organizations have been changing in recent years. We will also look at who managers are and what they do. One thing you will discover is that the work managers do is vitally important to organizations.
Focus on the following learning outcomes as you read and study this chapter:
1.1 Describe the characteristics of an organization.
1.2 Explain why managers are important to organizations.
1.3 Classify managers and non-managerial employees.
1.4 Define the terms: management, efficiency and effectiveness.
1.5 Describe the functions, roles and skills of managers.
1.6 Discuss whether the manager’s job is universal.
1.7 Outline the factors that are reshaping and redefining the manager’s job.
1.8 Explain the value of studying management.
Global responsibility’ is a term used by many, but it is less often used in relation to assisting children, who are often overlooked on the humanitarian ladder.
Describe the characteristics of an organization:
In our complex society, managers have come to play an important role in managing the organizations – both profit-oriented and non-profit-oriented – that make our society function well.
It recognizes the reality facing today’s managers – which the world has changed, and thus is redefining how work is done in organizations and the relationships between workers and managers. In workplaces of all types – offices, restaurants, retail stores, factories, and even in charitable organizations – managers must deal with changing expectations and new ways of organizing work and managing employees.
In this chapter, we introduce you to managers and management by looking at what an organization is and how organizations are changing, why managers are important, who managers are, what management is and what managers do.
The chapter concludes by discussing how the manager’s job is changing and why you should spend your time studying management.
What is an organization?
Organization: A deliberate arrangement of people to accomplish some specific purpose.
Managers work in organizations. If there were no organizations, there would be no need for managers.
These are all organizations because they share three common characteristics, as shown in Figure 1.1.
1. First, each organization has a distinct purpose. This purpose is typically expressed in terms of a goal or a set of goals that the organization hopes to accomplish.
Composed of people:
2. Second, each organization is composed of people. One person working alone is not an organization, and it takes people to perform the work that is necessary for the organization to achieve its goals.
3. Third, all organizations develop some deliberate structure so that their members can do their work. That structure may be open and flexible, with no clear and precise job duties or strict adherence to explicit job arrangements – in other words, it may be a simple network of loose work relationships; or the structure may be more traditional, with clearly defined rules, regulations and job descriptions, and some members identified as ‘bosses’ who have authority over other members.
In summary, the term organization refers to an entity that has a distinct purpose, includes people and has some type of deliberate structure.
Instead, today’s organizations may be structured more like Google or IKEA, both of which have chosen a flatter, networked structure over a hierarchical structure with layers of management and decisions made in narrow business functional areas.
Just how is the concept of an organization changing?
Some differences between a traditional view and a contemporary view of organizations. As these comparisons show, today’s organizations are becoming more open, flexible and responsive to changes.
Why are organizations changing?
Because the world around them has changed and is continuing to change. Societal, economic, global and technological changes have created an environment in which successful organizations (those that consistently attain their goals) must embrace new ways of getting their work done.
Examples of how the world is changing include the quest for more sustainable organizational practices, global economic, social and environmental challenges, the continuing spread of information technology and its impact on workplaces, increasing globalization and changing employee expectations.
But even though the concept of organizations is changing, managers and management continue to be important to organizations
1. Describe the three common characteristics of all organizations.
2. Explain how and why the concept of an organization is changing?
Why are managers important? (Explain why managers are important to organizations.)?
A great boss can change your life, inspiring you to new heights both professionally and personally and energizing you and your team to together overcome new challenges bigger than any one of you could tackle alone. If you have had the opportunity to work with a manager like this, count yourself lucky.
Such a manager can make a job a lot more enjoyable and productive. However, even managers who do not live up to such lofty ideals and expectations are important to organizations.
3. Provide three reasons for why managers are important?
Let us look at three reasons why.
The first reason managers are important is that organizations need their managerial skills and abilities more than ever in these uncertain, complex and chaotic times. As organizations deal with today’s challenges – the worldwide economic climate, the risks of global warming, changing technology, ever-increasing globalization and so forth – managers play an important role in identifying critical issues and crafting responses.
For example, Gerry Harvey, executive chairman of Harvey Norman, worked hard to maintain his retail chain’s sales and profitability in the difficult economic environment during the Global Financial Crisis (GFC) in 2007–10, which had a strong impact on many retailers in Australia and New Zealand who struggled to keep their businesses afloat and profitable.
who had to show leadership and his ‘call’ was to increase sales and discounting efforts to take advantage of the government’s stimulus packages, which were intended to lessen the impact of the gloomy economy and boost consumer confidence.
Reason: Another reason managers are important to organizations is that they are critical to getting things done.
For instance, in our chapter-opening story, Moira Kelly is not the person who is performing the actual surgery or medical treatment of the children, but she is responsible for creating and coordinating the plans, systems and conditions so that others can provide these medical interventions. Her job, as the leader of the organization, is to ensure that all the employees are doing their jobs, so that the organization can achieve its purpose. If work is not being done, or is not being done as it should be, she is the one who must find out why and get things back on track.
Finally, managers do matter to organizations! How do we know that? The Gallup Organization, which has polled millions of employees and tens of thousands of managers, has found that the single most important variable in employee productivity and loyalty is not pay or benefits or workplace environment; it is the quality of the relationship between employees and their direct supervisors.
Also, a recent study of organizational performance found that managerial ability was important in creating organizational value. What can we conclude from such reports? Those managers are important and they do matter! You can clearly see this in Moira Kelly, who is the visionary leader and the woman whose passion and dedication underpins the Children First Foundation and the work it is trying to do in the world.
Who are managers?
(Classify managers and non-managerial employees)
Manager: Someone who coordinates and oversees the work of other people so that organizational goals can be accomplished.
First-line managers: Managers at the lowest level of the organization who manage the work of non-managerial employees who are directly involved with the production or creation of the organization’s products.
Middle managers: Managers between the first-line level and the top level of the organization who manage the work of first-line managers.
Managers differ widely. They can be under the age of 18 to over age 80. They run large corporations as well as small entrepreneurial start-ups. They are found in government departments, hospitals, small businesses, not-for-profit organisations, museums, schools, and even non-traditional organisations such as political campaigns and music tours. Managers can also be found doing managerial work in every country in the world.
In addition, some managers are top-level managers, while others are first-line managers. And today, managers are nearly as likely to be women as they are men. However, the number of women in top-level manager positions remains low – there were only six female CEOs and five female chairs in the top 200 Australian companies in 2010.
We Simple to define who managers were: they were the organisational members who told others what to do and how to do it. It was easy to differentiate managers from non-managerial employees;
a single shift, an employee can be a team leader, equipment operator, maintenance technician, quality inspector or improvement planner. And as these so-called operative employees assume responsibilities that were traditionally deemed to belong to management, the definitions we used in the past no longer work.
how do we define who managers are? A manager is someone who coordinates and oversees the work of other people so that organisational goals can be accomplished. A manager’s job is not about personal achievement; it is about helping others to do their work and achieve.
coordinating the work of a departmental group, or it might mean supervising a single person. It could also involve coordinating the work activities of a team composed of people from several different departments or even people from outside the organisation, such as temporary employees or employees who work for the organisation’s suppliers.
Is there some way to classify managers in organizations?
There is, particularly for traditionally structured organisations – that is, those with deliberate work arrangements or structures shaped like a pyramid, reflecting the fact that the number of employees is greater at the bottom than at the top.
we typically describe managers as either first line, middle or top in this type of organization. These managers may have a variety of titles.
First-line managers are the lowest level of management and manage the work of non-managerial employees who are directly involved with producing the organization’s products or servicing the organization’s customers. They are often called supervisors, but they may also be called shift managers, office managers, team leaders or even forepersons.
Middle managers include all levels of management between the first-line level and the top level of the organization. These managers manage the work of first-line managers and may have titles such as regional manager, department head, project leader, store manager,
Top managers: Managers at or near the top level of the organisation who are responsible for making organisation-wide decisions and establishing the goals and plans that affect the entire organisation.
who are responsible for making organisation-wide decisions and establishing the goals and plans that affect the entire organisation. These individuals typically have titles such as managing director, chief executive officer, chief operating officer or chairman of the board.
we do know that someone must fulfil that role – that is, there must be someone who coordinates and oversees the work of others, even if that ‘someone’ changes as work tasks or projects change.
4. Explain how managers differ from non-managerial employees?
5. Describe how to classify managers in organizations?.
What is management?
(Define the terms: management, efficiency and effectiveness.)
Management: The process of coordinating and overseeing the work activities of others so that their activities are completed efficiently and effectively.
Efficiency: Doing things right or getting the most output from the least amount of inputs.
Effectiveness: Doing the right things, or completing activities so that organizational goals are attained.
What is Management?
Simply speaking, management is what managers do. But that simple statement does not tell us much does it? A better explanation is that management involves coordinating and overseeing the work activities of others so that their activities are completed efficiently and effectively.
What distinguishes a managerial position from a non-managerial one. However, this does not mean that managers can do what they want anytime, anywhere or in any way. Instead, management involves ensuring that work activities are completed efficiently and effectively by the people responsible for doing them, or at least that is what managers aspire to do.
Efficiency: is a vital part of management. It refers to getting the most output from the least amount of inputs. Because managers deal with scarce input – including resources such as people, money and equipment – they are concerned with the efficient use of those resources.
Effectiveness is often described as ‘doing the right things’ – that is, doing those work activities that will help the organization reach its goals.
Efficiency and effectiveness are related. It is easier to be effective if one ignores efficiency.
Yet students, alumni and companies have questioned whether students are being educated properly. Of course, in successful organizations high efficiency and high effectiveness typically go hand in hand. Poor management is most often due both to inefficiency and ineffectiveness, or to effectiveness achieved through inefficiency. In any country, be it Australia, China, Germany, New Zealand or Singapore, organizations and their managers must be committed to achieving both effectiveness and efficiency in order to be successful in an increasingly competitive and global business world.
Explain why efficiency and effectiveness are important to management.
What do managers do?
Describing what managers do is not an easy task. Just as no two organisations are exactly alike, so no two managers’ jobs are exactly alike! Despite this fact, management researchers have, after many years of study, developed three specific categorization schemes to describe what managers do: functions, roles and skills.
According to the functions approach, managers perform certain activities or functions as they efficiently and effectively coordinate the work of others. What are these functions? In the early part of the 20th century a French industrialist by the name of Henri Fayol proposed that all managers perform five functions: planning, organising, commanding, coordinating and controlling.
(See Figure 1.4)
In the mid-1950s, a management textbook first used the functions of planning, organizing, staffing, directing and controlling as a framework. Today, most management textbooks (including this one) are still organized around the management functions, although they have been condensed down to four basic and very important functions: planning, organizing, leading and controlling
Let us briefly define what each of these management functions encompasses.
If you have no particular destination in mind, it does not matter what road you take. However, if you have somewhere in particular you want to go, then you have to plan the best way to get there. Because organizations exist to achieve some particular purpose, someone must clearly define that purpose and the means for its achievement.
Management is that someone. As managers engage in planning, they define goals, establish strategies for achieving those goals, and develop plans to integrate and coordinate activities. Managers are also responsible for arranging and structuring work to accomplish the organization’s goals. We call this function organizing
When managers organize, they determine what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom and at what level decisions are to be made..
Every organization includes people, and a manager’s job is to work with and through people to accomplish organizational goals. This is the leading function.
When managers motivate subordinates, help to resolve work group conflicts, influence individuals or teams as they work, select the most effective communication channels, or deal in any way with employee behavior issues, they are leading.
The final management function that managers perform is controlling. After the goals are set and the plans formulated (planning function), the structural arrangements deter-mined (organizing function) and the people hired, trained and motivated (leading function), there has to be some evaluation of whether things are going as planned. To ensure that goals are being met and that work is being completed as planned; managers must monitor and evaluate performance. Actual performance must be compared with the previously set goals.
This process of monitoring, comparing and correcting is what we mean by the controlling function.
Just how well does the functions approach describe what managers do? Do managers always plan, organise, lead and then control? In reality, what a manager does may not always happen in this logical and sequential order.
What managers do is a tribute to their clarity and simplicity – managers plan, organize, lead and control.
Planning Management function that involves defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities.
Organizing: Management function that involves arranging and structuring work to accomplish the organization’s goals.
Leading: Management function that involves working with and through people to accomplish organizational goals.
Controlling: Management function that involves monitoring, comparing and correcting work performance.
Management roles: Specific categories of managerial behavior expected of and exhibited by a manager.
Henry Mintzberg, a prominent management researcher, studied actual managers by looking at the roles they play at work.
The term management roles refers to specific categories of managerial behavior. (Think of the different roles you play – student, employee, volunteer, sibling and so forth – and the different behaviors you are expected to play in these roles.)
When describing what managers do from a roles perspective, we are not looking at a specific person as such, but at the expectations and responsibilities that are associated with being the person in that role – the role of a manager.
All managers are required to perform duties that involve people (subordinates and persons outside the organization) and other duties that are ceremonial and symbolic in nature. These are the interpersonal roles.
When the dean of a university hands out degrees at graduation or a factory supervisor gives a group of high-school students a plant tour, they are acting in a figurehead role. All managers have a role as a leader. This role includes hiring, training, motivating and disciplining employees.
The third role within the interpersonal grouping is the liaison role.
Interpersonal roles: Managerial roles that involve people and other duties that are ceremonial and symbolic in nature.
All managers, to some degree, have informational roles: receiving, collecting and disseminating information.
if they are getting this information from outside their own organization they do so by reading magazines and talking with others to learn of changes in the public’s tastes, what competitors may be planning and the like.
Mintzberg called this the monitor role. Managers also act as conduits of information to organizational members. This is the disseminator role. When they represent the organization to outsiders, managers perform a spokesperson role.
Mintzberg identified four decisional roles, which revolve around making choices. As entrepreneurs, managers initiate and oversee new projects that will improve their organization’s performance.
As managers perform these different roles, Mintzberg concluded that their actual work activities involved interacting with others, with the organization itself and with the context outside the organization. He also proposed that as managers perform these roles, their activities include reflection (thoughtful thinking) and action (practical doing).
Mintzberg went on to explain that a manager does this in three ways: (1) by managing actions directly (for example, negotiating contracts, managing projects, and so on); (2) by managing people who take action (for example, motivating them, building teams, enhancing the organisation’s culture, and so on); or (3) by managing information that propels people to take action (using budgets, goals, task delegation, and so on).
a manager’s job is varied and complex. Managers need certain skills in order to perform the duties and activities associated with being manager. What types of skills do a manager need? Research by Robert L. Katz found that managers need three essential skills or competencies: technical, human and conceptual.
First-line managers, as well as many middle managers, are heavily involved in technical aspects of the organization’s operations. Technical skills are the job-specific knowledge and techniques needed to perform specific tasks proficiently.These skills tend to be more important for lower-level managers because they typically are managing employees who are using tools and techniques to produce the organization’s products or service the organization’s customers.
Technical skills: Knowledge of and proficiency in a certain specialized field.
Human skills or interpersonal skills represent the ability to work well with and understand others, to build cooperative effort within a team (that is, to lead), to motivate and to manage conflict.
Managers need to be aware of their own attitudes, assumptions and beliefs, as well as being sensitive to their subordinates’ perceptions, needs and motivations. Because all managers deal directly with people, human skills are crucial.
Katz said that human skills remain just as important at the top levels of management as they do at the lower levels. Managers with good human or interpersonal skills are able to get the best out of people. They know how to communicate, motivate, lead, and inspire enthusiasm and trust.
Human skills: The ability to work well with other people individually and in a group.
Managers must also have the ability to conceptualize and to think about abstract situations. They must be able to see the organization as a whole (‘helicopter perspective’) and understand the relationships between various subunits, and to visualize how the organization fits into its broader environment. Why? These abilities are essential to effective decision making, and all managers are involved in making decisions.
Conceptual skills: are needed by all managers at all levels, but Katz proposed that these skills become more important in top management positions. The reason for this is that upper-level managers often deal with abstract ideas, whereas lower-level managers normally spend more time dealing with observable objects and processes.
conceptual skills :The ability to think and to conceptualize about abstract and complex situations.
How relevant are these three management skills that Katz identified to today’s managers? They are still very relevant in understanding what
Skills managers at various organizational levels need to perform well in their jobs.
Describe the four functions of management.
Explain Mintzberg’s managerial roles.
Describe Katz’s three essential managerial skills, and discuss how the importance of these skills changes depending on managerial level.
Discuss whether the manager’s job is universal?
We have mentioned the universal need for management in organizations. So far, we have discussed management as if it were generic; that is, a manager is a manager regardless of where or what they manage.
If management is truly a generic discipline, then what managers do should be essentially the same whether they are top-level executives or low-level supervisors, in a business firm or a non-profit arts organization, in a large corporation or a small business, or located in Sydney or Singapore. Let us take a closer look at the generic issue.
Organizational level: The breadth of a manager’s job varies depending on his or her position in the organization.
All managers, regardless of level, make decisions. They plan, organize, lead and control. But the amount of time they give to each function is not necessarily the same... In addition, the content of the managerial functions changes with the manager’s level.
Top managers are likely to be concerned with designing the overall organization, whereas lower-level managers are more likely to focus on designing the jobs of individuals and work groups. This difference is simply a reflection of the breadth (broad to narrow) of each manager’s job.
Managers work in a variety of functional areas within organizations, such as manufacturing, marketing, human resources, accounting, information systems, and so on. Are there any differences in managers’ work in these functional areas? In relation to managerial roles, research has generally found that the relative degree and mixture of roles by a particular manager will depend on the functional area of the organization.
For example, manufacturing and production managers perform more of the decisional roles, marketing/sales managers perform more of the interpersonal roles, and accounting managers perform more of the informational roles. some roles that are universally required for managers independently of their functional areas, such as the leader, liaison and disturbance handler. This is based on the nature of managing, which involves getting work done through other people as well as being able to coordinate their own functional area’s work with other organizational areas and to handle the practical aspects of day-to-day activities within the functional area.
This means that a marketing manager, or a human resources manager, still has to carry out the management functions of planning, organizing, leading and controlling within his or her respective organizational areas.
Does a manager who works for the Taxation Office or a public library do the same things as a manager in a business firm? Put another way, is the manager’s job the same in both profit and not-for-profit organizations? The answer is, for the most part, ‘yes’.
All managers make decisions, set goals, create workable organization structures, hire and motivate employees, secure legitimacy for their organization’s existence, and develop internal political support in order to implement programs.
Of course, there are some noteworthy differences. The most important is in measuring performance. Profit, or ‘the bottom line’, acts as an unambiguous measure of the effectiveness of a business organization.
There is no such universal measure in not-for-profit organizations. Measuring the performance of charitable organizations (such as the Children First Foundation), museums, schools and government agencies is, therefore, considerably more difficult. Managers in these organizations generally do not face the market test for financial performance, although they too must be efficient and effective to help their organizations survive.
Although there are distinctions between the management of profit and not-for-profit organizations, the two are far more alike than they are different. Both are similarly concerned with having managers who can effectively and efficiently plan, organize, lead and control, while also managing the various parts of the organizational system and the changing situations the organization faces.
Is the manager’s job any different in a small organization than in a large one? This question is best answered by looking at the job of managers in small business firms and comparing them with the previous discussion of managerial roles.
An independently owned and operated, profit-seeking enterprise with fewer than 20 employees. First, however, let us define small business and the part it plays in society. Small businesses may be little in size, but they have a very large impact on our society.
The increasing importance of small businesses is a worldwide phenomenon; small businesses are becoming popular in places such as Japan, China, Korea, France, Germany and the UK. Their importance is demonstrated by the fact that, out of New Zealand’s approximately 476 560 enterprises in 2009, only 2434 companies employed more than 100 employees! Ninety-seven per cent of businesses in New Zealand employed fewer than 20 employees.
The small business manager’s most important role is that of spokesperson. The small business manager spends a large amount of time doing such outwardly directed activities as meeting with customers, arranging financing with bankers, searching for new opportunities and stimulating change.
In contrast, the most important concerns of a manager in a large organization are directed internally, towards deciding which organizational units get what resources and how much of them.
According to this study, the entrepreneurial role – looking for business opportunities and planning activities for performance improvement – is least important to managers in large firms, especially among first-level and middle managers.
Their job will combine the activities of a large corporation’s chief executive with many of the day-to-day activities carried out by a first-line supervisor.
Cross-national transferability: The final generic management issue concerns whether management concepts are transferable across national borders. If managerial concepts were completely generic, they would apply universally, regardless of economic, social, political or cultural differences.
At this point, it is sufficient to say that most of the concepts discussed in future chapters apply to Australia, New Zealand, the US, Canada, the UK and other Western capitalist democracies. The concepts would have to be modified if we wanted to apply them to India, China, Chile or any other country whose economic, political, social or cultural environment differs greatly from that of the so-called free market democracies.
11. Describe the similarities and differences between managers in different organizational areas, at different organizational levels and in different types of organizations.
12. Explain how the job of managing a small business is different from that of managing a large one.
13. Discuss whether management concepts are transferable across national borders.
How is the manager’s job changing?
Outline the factors that are reshaping and redefining the manager’s job?
Earlier in this chapter we discussed how organizations are changing. Managers have always had to deal with changes taking place inside and outside their organization.
In today’s world, where managers everywhere are dealing with global economic and political uncertainties, environmental concerns in relation to global warming and climate change, security threats, corporate ethics scandals, and technological advancements, change is a constant.
Managers in all organizations are under increased pressure to adhere to new regulations and increased openness when it comes to the issue of corporate governance. The same goes for balancing the work life and personal life of employees.
Changing technology is also putting pressures on how a company deals with its impact. As the demand for a company’s products or services varies, managers have to find new ways to cope with the uncertainty this creates.
We discuss these changes and their impact on the way manager’s plan, organize, lead and control. We want to highlight three of these changes that appear to be having a significant impact on managers’ jobs: the increasing importance of customers, innovation and sustainability.
Importance of customers to the manager’s job:
Every workday, John Chambers, CEO of Cisco Systems, listens to 15 to 20 voice mails that have been forwarded to him from dissatisfied Cisco customers. He says, ‘E-mail would be more efficient, but I want to hear the emotion, I want to hear the frustration, I want to hear the caller’s level of comfort with the strategy we are employing. I cannot get that through e-mail.
Here is a manager who recognizes the importance of customers. Every organization needs customers. Without customers, most organizations would cease to exist. Yet, focusing on the customer has long been thought to be the responsibility of marketing types.
‘Let the marketers worry about the customers’ is how many managers felt. We are discovering, however, that employee attitudes and behaviors play a big role in customer satisfaction.
Managers everywhere are beginning to understand that delivering consistent high-quality service is essential for success and survival in today’s competitive environment and that employees are an important part of that equation.
The implication is clear – they must create a customer-responsive organisation where employees are friendly and courteous, accessible, knowledgeable, prompt in responding to customer needs, and willing to do what is necessary to please the customer.
Importance of innovation to the manager’s job:
‘Nothing is more risky than not innovating.’ Innovation means doing things differently, exploring new territory and taking risks. And innovation is not just for high-tech and technologically advanced organisations.
Even companies such as McDonald’s have to be responsive to changes in customers’ preferences or react to changes in the marketplace.
For example, McDonald’s Australia has been recognized as a leader in innovation within the global empire.41 Its new initiatives, such as McCafes and nutritional labeling, have now been copied by McDonald’s around the world.
At Tata of India, the company’s top manager, Chairman Ratan Tata, told his employees during the bleak aspects of the global economic downturn to ‘Cut costs.
Innovation is critical. In today’s world, organisational managers – at all levels and in all areas – need to encourage their employees to be on the lookout for new ideas and new approaches, not just in the products or services the organisation provides but in everything that is done.
Establishing an innovative ‘culture’ within organisations is an important driver of innovation, according to the second annual survey of Australian and New Zealand companies commissioned by technology services group Fujitsu.
Importance of sustainability to the manager’s job:
ANZ Bank Group declared it would minimise its environmental footprint by buying electricity generated without the use of coal. It joined a group of other financial services companies, such as Westpac Banking Corporation, National Australia Bank and Insurance Australia Group (IAG), which also had declared their intention to go carbon neutral.
Sustainability: A company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental and social opportunities into its business strategies.
Sustainability issues are now moving up the agenda of business leaders and the boards of thousands of companies. Running an organisation in a more sustainable way will mean that managers have to make informed business decisions based on thorough communication with various stakeholders, understanding their requirements, and starting to factor economic, environmental and social aspects into how they pursue their business strategies.
We will examine managing for sustainability and its importance to planning, organizing, leading and controlling in several chapters as well as special sections – called ‘Managing for sustainability’
14. Discuss the changes that are impacting on managers’ jobs.
15. Explain why customer service, innovation and sustainability are important to the manager’s job.
Why study management?
(Explain the value of studying management?)
You may be wondering why you need to study management. If you are an accounting major, marketing major or any major other than management, you may not understand how studying management is going to help you in your career.
The value of studying management can be explained by looking at four things: (1) the universality of management, (2) the reality of work, (3) the way we manage our own lives, and (4) the challenges and rewards of being a manager.
The universality of management: Universality of management The reality that management is needed in all types and sizes of organisations, at all organisational levels, in all organisational areas and in organisations in all countries around the globe.
Definition of UM: Management is needed in all types and sizes of organisations, at all organisational levels and in all organisational work areas, regardless of the country in which the organisation is located. This is known as the universality of management
you will be able to recognize poor management and work to correct it. In addition, you will be able to recognize good management and encourage it, whether it is in an organization with which you are interacting or an organisation in which you are employed.
The reality of work:
For studying management is the reality that once you graduate from university and begin your career, you will either manage or be managed. For those who plan careers in management, an understanding of the management process forms the foundation upon which to build your management skills.
Assuming that you will have to work for a living, and recognising that you will almost certainly work in an organisation, you will probably have some managerial responsibilities even if you are not a manager or work for a manager. Studying management can give you a great deal of insight into the way your boss behaves, and the internal workings of organisations, which will be valuable whatever your career choice.
Management is that most of us at some stage will in fact be a manager, even if it is simply a
manager of ourselves and our own actions. You have to plan, organise, lead and control your own life, and reading this book may provide you with new insights and understanding that will be valuable for your future.
In addition, recent changes in organisational life are placing increased emphasis on individual control and responsibility, and the rapidly developing ideas of working from home, self-managed work groups or teams, empowerment, quality circles and so forth will result in many of us having to take greater control of our own professional future.
This is particularly true in organisations where the reduction of management layers has made the organisation flatter and more decentralised, and where work or services are frequently contracted out to other providers.
Management philosophies and principles will continue to evolve and develop as they have done over the years.
Organizations to the changing situation, it will be difficult for their organisations to maintain their global competitiveness, thus limiting employment opportunities in the future.
Challenges and rewards of being a manager:
We cannot leave our discussion of the value of studying management without looking at the challenges and rewards of being a manager (see Table 1.4). What does it mean to be a manager?
First, there are many challenges. It can be a tough and often thankless job.
In addition, a portion of a manager’s job (especially at lower organisational levels) may entail duties that are often more clerical (such as compiling and filing reports, dealing with bureaucratic procedures, or doing paperwork) than managerial.
It can be a challenge to motivate workers in the face of uncertainty and chaos. Managers may find it difficult to effectively blend the knowledge, skills, ambitions and experiences of a diverse work group.
Finally, as a manager, you are not in full control of your destiny. Your success typically depends on others’ work performance. Being a manager in today’s dynamic workplace presents many challenges.
Yet, despite these challenges, being a manager can be very rewarding. You are responsible for creating a work environment in which organisational members can do their work to the best of their ability and help the organisation achieve its goals.
You support, coach and nurture others, and help them make good decisions. Also, you will meet and work with a variety of people – both inside and outside the organisation.
Rewards of being a manager may include receiving recognition and status in the organisation and in the community, playing a role in influencing organisational outcomes, and receiving attractive compensation in the form of salaries, bonuses and share options.
Finally, organisations need good managers.
The combined efforts of motivated and passionate people working together that organisations accomplish their goals.
16. Explain the universality of management concept.
17. Discuss why an understanding of management is important even if you do not plan to be a manager.
18. Describe the rewards and challenges of being a manager.
LEARNING SUMMARY OUTCOMES
Learning outcome 1.1: Describe the characteristics of an organisation.
Managers work in an organisation, which is a deliberate arrangement of people to accomplish some specific purpose. Organisations have three characteristics: (1) they have a distinctive purpose; (2) they are composed of people; and (3) they have a deliberate structure. Many of today’s organisations are structured to be more open, flexible and responsive to changes, and have undergone some major changes in relation to how they operate, as was explored in Table 1.1.
Learning outcome 1.2: Explain why managers are important to organisations.
Managers are important to organisations for three reasons. First, organisations need their managerial skills and abilities in uncertain, complex and chaotic times. Second, managers are critical to getting things done in organisations. Finally, managers contribute to employee productivity and loyalty; the way employees are managed can affect the organisation’s financial performance; and managerial ability has been shown to be important in creating organisational value.
Learning outcome 1.3: Classify managers and non-managerial employees.
Managers coordinate and oversee the work of other people so that organisational goals can be accomplished. Non-managerial employees work directly on a job or task and have no one reporting to them. In traditionally structured organisations, managers can be first-line, middle or top. In other more loosely configured organisations, the managers may not be as readily identifiable, although someone must fulfil that role.
Learning outcome 1.4: Define the terms: management, efficiency and effectiveness.
Broadly speaking, management is what managers do, and management involves coordinating and overseeing the efficient and effective completion of others’ work activities. Efficiency means getting the most output from the least amount of input, or doing things right. Effectiveness means doing those work activities that help the organisation to reach its goals, or doing the right things.
Learning outcome 1.5: Describe the functions, roles and skills of managers.
The four functions of management include: (1) planning (defining goals, establishing strategies and developing plans), (2) organising (arranging and structuring work), (3) leading (working with and through people), and (4) controlling (monitoring, comparing and correcting work performance).
Mintzberg’s managerial roles include: (1) interpersonal roles, which involve people and other ceremonial/symbolic duties (figurehead, leader and liaison); (2) informational roles, which involve collecting, receiving and disseminating information (monitor, disseminator and spokesperson); and (3) decisional roles, which involve making choices (entrepreneur, disturbance handler, resource allocator and negotiator). Mintzberg’s newest description of what managers do proposes that managing is about influencing action, which managers do in three ways: (1) by managing actions directly; (2) by managing people who take action; and (3) by managing information that impels people to take action.
Katz’s managerial skills include technical (job-specific knowledge and techniques), human or interpersonal (ability to work well with people) and conceptual (ability to think and conceptualise). Technical skills are most important for lower-level managers, while conceptual skills are most important for top managers. Human skills are equally important for all managers. Some other managerial skills also identified include managing human capital, inspiring commitment, managing change, using purposeful networking, and so forth.
Learning outcome 1.6: Discuss whether the manager’s job is universal.
All managers, independently of their organisational level, have to plan, organise, lead and control; however, the time they give
to each function varies depending on whether they are first-line managers, middle managers or top managers. In relation to
the manager’s functional area, there are some differences but also similarities in relation to managerial roles being performed;
however, all managers have to carry out the management functions of planning, organising, leading and controlling within
their respective organisational areas. Although there are distinctions between the management of profit and not-for-profit
organisations, there are many commonalities in terms of what managers have to do in both of these types of organisations.
While there are differences in degree and emphasis of both functions and roles, managers in both small and large organisations
perform essentially the same activities. Finally, there are some major differences in preferred managerial practices between
countries, which means that, in this area, the manager’s job is less universal.
Learning outcome 1.7: Outline the factors that are reshaping and redefining the manager’s job.
The changes impacting managers’ jobs include global economic and political uncertainties, changing workplaces, ethical
issues, security threats and changing technology. Managers must be concerned with customer service, since employee
attitudes and behaviours play a big role in customer satisfaction. Managers must also be concerned with innovation, because
it is important for organisations to be competitive. And finally, managers must be concerned with sustainability as business
goals are developed.
Learning outcome 1.8: Explain the value of studying management.
It is important to study management for four reasons: (1) universality of management, which refers to the fact that managers
are needed in all types and sizes of organisations, at all organisational levels and work areas, and in all global locations;
(2) the reality of work – that is, you will either manage or be managed; (3) managing yourself – there is a greater need to take
greater control of our own actions in the new types of organisations that are developing; and (4) the awareness that there
are significant rewards (such as creating work environments to help people work to the best of their ability; supporting and
encouraging others; helping others to find meaning and fulfilment in work; and so on) and challenges (such as, it is hard work;
sometimes having more clerical than managerial duties; having to deal with a variety of personalities; and so on) in being
Thinking Critical About Management Issues in Business or Firm or Company:
1 How do managers differ from non-managerial employees?
2 Is your university lecturer or professor a manager? Discuss in terms of Fayol’s managerial functions, Mintzberg’s managerial roles and Katz’s skills.
3 ‘ The manager’s most basic responsibility is to focus people towards performance of work activities to achieve desired outcomes.’ What is your interpretation of this statement? Do you agree with it? Why or why not?
4 Explain the universality of management concept. Does it still hold true in today’s world? Why or why not?
5 Is there one best ‘style’ of management? Why or why not?
6 In today’s environment, which is more important to organisations – efficiency or effectiveness? Explain your choice.
7 Can you think of situations where management does not matter to organisations? Explain.
8 Researchers at Harvard Business School have found that the most important managerial behaviours involve two fundamental things: (1) enabling people to move forward in their work; and (2) treating them decently as human beings. What do you think of these two managerial behaviours? What are the implications for someone, like yourself, who is studying management?
9 ‘Management is undoubtedly one of humankind’s most important inventions.’ Do you agree with this statement? Why or why not?
Becoming a Manager:
What are some of the action steps that you can take to prepare yourself better for becoming a manager?
• Get in the habit of reading the business section of the newspapers, as well as The Australian Financial Review and magazines such as Business Review Weekly (BRW). These will give you a feel for the issues that are important for managers and organizations.
• Perhaps one of the best ways to learn more about what is required to become an effective manager is to observe and learn from good managers (and also bad managers – to learn what not to do!).
• Another way to get a better understanding of what problems and challenges a manager may encounter is to talk with people who have management experience. Perhaps your parents or relatives are people from whom you could gain some valuable insights.
• In your own words, write down three things you learned in this chapter about being a good manager.
• If you are involved in student organisations, volunteer for leadership roles or for projects where you can practise planning, organising, leading and controlling different projects and activities. You can also gain valuable managerial experience by taking a leadership role in class team projects.
Management yesterday and today
In this chapter, we are going to take a trip back in time to see how the field of study called management has evolved. History is important because it can put current activities in perspective. What you are going to find out is that today’s managers still use many elements of the historical approaches to management. We will also look at some of the current trends and issues that are influencing management in today’s organisations. Focus on the following learning outcomes as you read and study this chapter:
2.1 Provide some examples of early management practice.
2.2 Discuss the important contributions of scientific management.
2.3 Explain the influences of general administrative theorists.
2.4 Describe the quantitative approach.
2.5 Discuss the development and uses of the organizational behavior approach.
2.6 Clarify the systems and contingency approaches.
2.7 Provide examples of current trends and issues that are influencing management today.
Ford was one of the earliest companies to make cars, starting in 1893 when Henry Ford successfully built his first car-buggy. Ford came to Australia in 1904, but it was not until 1925 that it started local manufacturing at its first factory at Geelong, Victoria. At first, imported components were assembled, but in 1958 construction started on a new factory in the outer Melbourne suburb of Broad meadows, and the first Australian-made Falcon rolled off the assembly line in June 1960.
It has worked hard to develop its concept of a ‘world car’. The company is convinced that the only way to make money on cars, especially the small ones it has struggled to sell, is by spreading development and other costs over one huge, global market and thus gain efficiency and effectiveness in its manufacturing.
As you can also see from these examples, organizations often face new – and sometimes very threatening – challenges. The management of any organization – whether it is based on highly competitive global car manufacturing, governance of a country, or providing service to a community on a not-for-profit basis – finds its opportunities and constraints in the environmental factors that surround it.
As we enter the second decade of the 21st century, it is apparent that there are some new and very significant factors in the environment that must be considered in the management and operations of all businesses.However, organisations have faced large external threats and pressures, such as global wars and depressions, in the past. Sometimes innovations in business itself created the pressure that forced businesses to innovate or to disappear. In fact, the history of management is filled with evolutions and revolutions in implementing new ideas.
Looking at the history of management can help us to understand today’s management theory and practice. It can help us see what did and did not work.
we will introduce you to the origins of many contemporary management concepts and show how they have evolved to reflect the changing needs of organisations and society as a whole. We will also introduce important trends and issues that managers currently face, in order to link the past with the future and to demonstrate that the field of management is still evolving.
HISTORICAL BACKGROUND OF MANAGEMENT
(Provide some examples of early management practice.)
Organised endeavours directed by people responsible for planning, organising, leading and controlling activities have existed for thousands of years. The Egyptian pyramids and the Great Wall of China, for instance, are tangible evidence that projects of tremendous scope, employing tens of thousands of people, were undertaken well before modern times.
The pyramids are a particularly interesting example. The construction of a single pyramid occupied more than 100â•›000 workers for 20 years.2 Who told each worker what to do? Who ensured that there would be enough stones at the site to keep the workers busy? The answer to such questions is managers.
Regardless of what managers were called at the time, someone had to plan what was to be done, organise people and materials to do it, lead and direct the workers, and impose some controls to ensure that everything was done as planned.
Another example of early management can be seen during the 1400s in the city of Venice, Italy, a major economic and trade centre. The Venetians developed an early form of business enterprise and engaged in many activities common to today’s organisations.
These examples from the past demonstrate that organisations have been around for thousands of years and that management has been practised for an equivalent period. However, two pre-20th-century events played particularly significant roles in promoting the study of management.
First, in 1776 Adam Smith published a classic economics doctrine, The Wealth of Nations, in which he argued the economic advantages that organisations and society would gain from the division of labour, the breakdown of jobs into narrow and repetitive tasks (job specialisation).
Using the pin manufacturing industry as an example, Smith claimed that ten individuals, each doing a specialised task, could produce about 48â•›000 pins a day between them. Smith concluded that division of labour increased productivity by increasing each worker’s skill and dexterity, by saving time lost in changing tasks, and by creating labour-saving inventions and machinery.
The second important, pre-20th-century influence on management was the Industrial Revolution. Starting in the 18th century in Great Britain, the revolution had crossed the Atlantic to America by the end of the American Civil War.
Industrial Revolution A period during the late 18th century when machine power was substituted for human power, making it more economical to manufacture goods in factories than at home. Many organisations have used the principles of scientific management in the creation of assembly lines to maximise their production efficiency.
The main contribution of the Industrial Revolution was that human power was replaced by machine power, which, in turn, made it more economical to manufacture goods in factories rather than at home. These large, efficient factories using power-driven equipment required managerial skills. Why?
We present the six main approaches to management: scientific management, general administrative theory, quantitative approach, organisational behaviour, systems approach and contingency approach.. Keep in mind that each approach is concerned with the same ‘animal’; the differences reflect the backgrounds and interests of the writer.
A relevant analogy is the classic story of the blind men and the elephant, in which each man declares the elephant to be like the part he is feeling: the first man touching the side declares that the elephant is like a wall; the second touches the trunk and says the elephant is like a snake; the third feels one of the elephant’s tusks and believes it to be like a spear; the fourth grabs a leg and says an elephant is like a tree; and the fifth touches the elephant’s tail and concludes that the animal is like a rope. Each is encountering the same elephant, but what each observes depends on where he stands.
Similarly, each of the six perspectives is correct and contributes to our overall understanding of management. However, each is also a limited view of a larger animal. We will begin our journey into management’s past by looking at the first major theory of management – scientific management.
1. Explain why studying management history is important.
2. Describe some early examples of management practice.
(Discuss the important contributions of scientific management)
Scientific management: (An approach that involves using scientific methods to define the ‘one best way’ for a job to be done.)
We have seen how management has been used in organized efforts since early history; the formal study of management did not begin until early in the 20th century. If you had to pinpoint the year modern management theory was born, 1911 might be a logical choice.
“That was the year Frederick Winslow Taylor’s Principles of Scientific Management was published.”
Its contents became widely accepted by managers around the world. The book described the theory of scientific management: the use of scientific methods to define the ‘one best way’ for a job to be done. The aim was to make organizations and workers as efficient as possible.
Important contributions to scientific management theory were made by Frederick W. Taylor and Frank and Lillian Gilbreth. Let us look at what they did.
Frederick W. Taylor:
Taylor did most of his work at the Midvale and Bethlehem Steel Companies in Pennsylvania.
They were inclined to ‘take it easy’ on the job, and Taylor believed that worker output was only about one-third of what was possible.
Managers and workers were in continual conflict. Taylor set out to correct the situation by applying the scientific method to shop floor jobs.
He spent more than two decades passionately pursuing the ‘one best way’ for each job to be done. Taylor’s experiences at Midvale led him to define clear guidelines for improving production efficiency.
He argued that these four principles of management (see Table 2.1) would result in prosperity for both workers and managers.
How did these scientific principles really work? Let us look at an example.
Probably the best-known example of Taylor’s scientific management was the pig-iron experiment.
After scientifically trying different combinations of procedures, techniques and tools, Taylor succeeded in getting that level of productivity.
He put the right person on the job with the correct tools and equipment, had the worker follow his instructions exactly, and motivated the worker with an economic incentive of a significantly higher daily wage.
Through his groundbreaking studies of manual work using scientific principles, Taylor became known as the ‘father’ of scientific management. His ideas spread in the United States (where, for example, Henry Ford applied his ideas in relation to the manufacturing of the Model T automobile), but also in France, Germany, Russia and Japan, and inspired others to study and develop methods of scientific management. His most prominent followers were Frank and Lillian Gilbreth.
Frank and Lillian Gilbreth:
A construction contractor by trade, Frank Gilbreth gave up his contracting career in 1912 to study scientific management after hearing Frederick Taylor speak at a professional meeting.
Frank and his wife, Lillian, a psychologist, studied work to eliminate wasteful hand-and-body motions.
The Gilbreths also experimented with the design and use of the proper tools and equipment for optimizing work performance.
Frank Gilbreth is probably best known for his experiments in bricklaying.
By carefully analyzing the bricklayer’s job, he reduced the number of motions in laying exterior brick from 18 to about five, and in laying interior brick from 18 to two.
Using Gilbreth’s techniques, the bricklayer could be more productive and less fatigued at the end of the day.
Therbligs: (A classification system for labeling basic hand motions.)
The Gilbreths were among the first researchers to use motion pictures to study hand-and-body motions.
They invented a device, called a micro chronometer, that recorded a worker’s motions and the amount of time spent doing each motion.
Wasted motions missed by the naked eye could be identified and eliminated.
The Gilbreths also devised a classification scheme to label 17 basic hand motions (such as search, grasp, hold), which they called therbligs (Gilbreth spelled backwards with the‘t’ and the ‘h’ transposed).
This scheme allowed the Gilbreths a more precise way of analyzing a worker’s exact hand movements.
How do today’s managers use scientific management?
The guidelines that Frederick Taylor and others devised for improving production efficiency are still used in organizations today.
When managers analyze the basic work tasks that must be performed, use time-and-motion study to eliminate wasted motions, hire the best-qualified workers for a job and design incentive systems based on output, they are using the principles of scientific management.
3. Describe the important contributions made by Frederick W. Taylor and Frank and Lillian Gilbreth.
4. Discuss how today managers use scientific management is.
General administrative theory:
(Explain the influences of general administrative theorists)
: An approach to management that focuses on describing what managers do and what constituted good management practice.
Another group of writers looked at the subject of management but focused on the entire organization.
These researchers developed more general theories of what managers do and what constituted good management practice, which formed the basis for a new perspective on management called general administrative theory.
Let us look at some important contributions to this perspective.
The two most prominent theorists behind the general administrative approach were Henri Fayol and Max Weber.
Principles of management: Fundamental rules of management that could be taught in schools and applied in all organizational situations.
Fayol described management as a universal set of functions that included planning, organising, commanding, coordinating and controlling.
Let us look more closely at what he had to say.
Fayol wrote during the same time period as Frederick Taylor.
While Taylor was concerned with first-line managers and the scientific method, Fayol’s attention was directed at the activities of all managers.
Fayol described the practice of management as something distinct from accounting, finance, production, distribution and other typical business functions. He argued that management was an activity common to all human endeavours in business, government and even in the home.
He then proceeded to state 14 principles of management – fundamental rules of management that could be taught in schools and applied in all organisational situations.
FAYOL’S 14 PRINCIPLES OF MANAGEMENT:
Bureaucracy: A form of organization characterized by division of labour, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships.
Weber (pronounced VAY-ber) was a German sociologist who studied organisations
Writing in the early 1900s, he developed a theory of authority structures and relations based on an ideal type of organisation he called a bureaucracy. Weber recognised that this ‘ideal bureaucracy’ did not exist in reality.
Instead, he intended it as a basis for theorising about work and how work could be done in large groups. His theory became the model structural design for many of today’s large organisations.
The features of Weber’s ideal bureaucratic structure are outlined in Figure 2.2.
Bureaucracy, as described by Weber, is a lot like scientific management in its ideology. Both emphasise rationality, predictability, impersonality, technical competence and authoritarianism.. Although Weber’s writings were less operational than Taylor’s, the fact that his ‘ideal type’ still describes many contemporary organisations attests to the importance of his work.
How do today’s managers use general administrative theories?
Several of our current management ideas and practices can be directly traced to the contributions of the general administrative theorists.
In addition, his 14 principles serve as a frame of reference from which many current management concepts – such as managerial authority, centralised decision making, reporting to only one boss, and so forth – have evolved..
Weber’s bureaucracy are still evident in large organisations, his model is not as popular today as it was throughout most of the 20th century.
Contemporary managers feel that bureaucracy’s emphasis on strict division of labour, adherence to formal rules and regulations, and impersonal application of rules and controls takes away the individual employee’s creativity and limits the organisation’s ability to respond quickly to an increasingly dynamic environment.
However, even in flexible organisations of creative professionals – such as Google, Samsung or Microsoft – some bureaucratic mechanisms are necessary to ensure that resources are used efficiently and effectively.
5.Discuss Henri Fayol’s 14 management principles.
6. Describe Max Weber’s contributions to the general administrative theory of management.
7. Discuss how today’s managers use general admi
Quantitative approach to management
(Describe the quantitative approach)
Quantitative approach: The use of quantitative techniques to improve decision making.
A Krispy Kreme doughnut outlet and noticed an employee randomly selecting and weighing some doughnuts? This is an example of a quantitative technique called statistical quality control.
The activity is an application of a statistical technique to ensure that the doughnut-making process is producing a standard-size doughnut.
The quantitative approach involves the use of quantitative techniques, such as data collection and mathematical manipulation of that data, to improve decision making. This approach has also been labelled operations research or management science.
The quantitative approach evolved out of the development of mathematical and statistical solutions to military problems during the Second World War. One group of military officers, nicknamed the ‘Whiz Kids’, joined the Ford Motor Company in the mid-1940s and immediately began using statistical methods and quantitative models to improve decision making in the design and manufacturing of the vehicles that Ford was producing.
What exactly does the quantitative approach do?
It involves the application of statistics, optimization and information models, and computer simulations to management activities. Linear programming, for instance, is a technique that managers use to improve resource allocation decisions.
Work scheduling can be more efficient as a result of critical-path scheduling analysis.
Decisions on determining a company’s optimum inventory levels have been significantly influenced by the economic order quantity model. Each of these is an example of quantitative techniques being applied to improve managerial decision making.
Another area where quantitative techniques are used frequently is in total quality management A quality revolution swept through both the business and public sectors in the 1980s and 1990s. It was inspired by a small group of quality experts, the most famous being W. Edwards Deming and Joseph M. Juran..
The ideas and techniques they advocated in the 1950s had few supporters in the United States but were enthusiastically embraced by Japanese organisations. As Japanese manufacturers began beating US competitors, such as in the car manufacturing industry, in quality comparisons, however, Western managers soon took a more serious look at Deming’s and Juran’s ideas … ideas that became the basis for today’s quality management programs.
Total quality management, or TQM:
TQM: A philosophy of management driven by continual improvement and responding to customer needs and expectations. The term customer includes anyone who interacts with the organization’s product or services internally or externally.
It encompasses employees and suppliers, as well as the people who purchase the organisation’s goods or services. Continual improvement is not possible without accurate measurements, which require statistical techniques that measure every critical variable in the organisation’s work processes. These measurements are compared against standards to identify and correct problems.
TQM was a departure from earlier management approaches that were based on the belief that keeping costs low was the only way to increase productivity. The car manufacturing industry in Western countries such as the US and Australia is often used as an example of what can go wrong when managers focus solely on trying to lower costs.
Customers were rejecting US- and Australian-made cars in favour of Japanese and some European cars.
When you consider the costs of rejects, repairing shoddy work, product recalls, and expensive controls to identify quality problems, these traditional Western manufacturers were actually less productive than many foreign competitors.
How do today’s managers use the quantitative approach?
The quantitative approach has contributed directly to management decision making in the areas of planning and control.
For instance, when managers make budgeting, scheduling, quality control and similar decisions, they typically rely on quantitative techniques.
The availability of sophisticated computer software programs to aid in developing models, equations and formulas has made the use of quantitative techniques somewhat less intimidating for managers, although they must still be able to interpret the results.
These include the fact that many managers are unfamiliar with and intimidated by quantitative tools, behavioural problems are more widespread and visible, and it is easier for most students and managers to relate to real, day-to-day people problems than to the more abstract activity of constructing quantitative models.
8. Explain what the quantitative approach has contributed to the field of management.
9. Discuss how today’s managers use the quantitative approach.
Towards understanding organizational behavior
(Discuss the development and uses of the organizational behaviors approach.)
Organizational behavior (OB) :A field of study concerned with the actions (behaviors) of people at work.
why some writers and researchers have chosen to look at management by focusing on the organisation’s human resources.
Much of what managers do today when managing people – motivating, leading, building trust, working with a team, managing conflict – has come out of OB research.
Although there were a number of people in the late 1800s and early 1900s who recognized the importance of the human factor to an organization’s success, four individuals stand out as early advocates of the OB approach.
They are Robert Owen, Hugo Munsterberg, Mary Parker Follett and Chester Barnard.
The contributions of these individuals were varied and distinct, yet they all had in common a belief that people were the most important asset of the organization and should be managed accordingly.
Their ideas provided the foundation for such management practices as employee selection procedures, motivation programs and work teams.
Figure 2.3 summarizes the most important ideas of these early advocates.
The Hawthorne Studies:
Hawthorne Studies: A series of studies during the 1920s and 1930s that provided new insights into individual and group behavior.
Without question, the most important contribution to the developing OB field came out of the Hawthorne Studies, a series of studies conducted at the Western Electric Company Works in Cicero, Illinois, in the United States.
These studies, which started in 1924 and continued through the early 1930s, were initially designed by Western Electric industrial engineers as a scientific management experiment.
They wanted to examine the effect of various illumination levels in the factory on worker productivity. Control and experimental groups were set up, with the experimental group being exposed to various lighting intensities and the control group working under a constant intensity.
If you were one of the industrial engineers in charge of this experiment, what would you have expected to happen?
That individual output in the experimental group would be directly related to the intensity of the light?
Seems perfectly logical, doesn’t it?
However, they found that, as the level of light was increased in the experimental group, output for both groups increased.
Then, much to the surprise of the engineers, as the light level was decreased in the experimental group, productivity continued to increase in both groups.
a productivity decrease was observed in the experimental group only when the level of light was reduced to that of a moonlit night.
In 1927 the Western Electric engineers asked Harvard professor Elton Mayo and his associates to join the study as consultants.
Thus began a relationship that would last until 1932 and encompass numerous experiments in the redesign of jobs, changes in workday and work-week length, introduction of rest periods, and individual versus group wage plans.
one experiment was designed to evaluate the effect of a group piecework incentive pay system on group productivity.
The results indicated that the incentive plan had less effect on a worker’s output than did group pressure, acceptance and the accompanying security. The researchers concluded that social norms or group standards were the key determinants of individual work behaviour.
Mayo concluded that people’s behaviour and attitudes are closely related, that group factors significantly affect individual be-haviour, that group standards establish individual worker output, and that money is less a factor in determining output than are group standards, group attitudes and security.
These conclusions led to a new emphasis on the human behaviour factor in the management of organisations.
However, the conclusions were criticized. Critics attacked the research procedures, the analyses of the findings and the conclusions.
From a historical standpoint, however, it is of little importance whether the studies were academically sound or their conclusions justified. What is important is that they stimulated an interest in human behaviour in organisations.
The human relations movement and behavioural science theorists
Human relations movement: The belief, for the most part unsubstantiated by research, that a satisfied worker will be productive.
Behavioral science theorists: Psychologists and sociologists who relied on scientific method for the study of organisational behaviour.
Another group within the OB approach is important to management history for its unflinching commitment to making management practices more humane. Members of the human relations movement, unsubstantiated by research, uniformly believed in the importance of employee satisfaction – a satisfied worker was believed to be a productive worker.
For the most part, the people associated with this movement – Abraham Maslow and Douglas McGregor – were individuals whose views were shaped more by their personal philosophies than by substantive research evidence. (Both of these theorists are discussed more fully in Chapter 15, which deals with the topic of motivation.)
Some OB researchers relied on the scientific method for the study of organisational behaviour. These behavioural science theorists engaged in objective research of human behaviour in organisations.
They carefully attempted to keep their personal beliefs out of their work. They sought to develop rigorous research designs that could be replicated by other behavioural scientists.
In so doing, they hoped to build a science of organisational behaviour. They included such names as Fiedler, Vroom, Herzberg, Locke, McClelland and Hackman. Their contributions to the understanding of organisational behaviour will also be covered in later chapters.
How do today’s managers use the behavioural approach?
The behavioural approach has largely shaped today’s organisations.
From the way managers design motivating jobs, to the way they work with employee teams, to the way they use open communication, we can see elements of the behavioural approach.
Ford Australia redesigned the jobs of its employees and introduced a more participative style of management to create a higher degree of engagement in its workforce in order to improve the quality of the cars that were produced.
what the early OB advocates proposed, and the conclusions from the Hawthorne Studies, provided the foundation for our current theories of motivation, leadership, group behaviour and development, and numerous other behavioural topics
10. Describe the contributions of the early advocates of organisational behaviour.
11. Explain the contributions of the Hawthorne Studies to the field of management.
12. Identify how the human relations and behavioural science theorists differ.
13. Discuss how today’s managers use the behavioural approach.
(Clarify the systems and contingency approaches.)
As we have seen, many elements of the earlier approaches to management theory continue to influence how managers manage. Most of these earlier approaches focused on managers’ concerns inside the organisation.
Starting in the 1960s, management researchers began to look at what was happening in the external environment outside the boundaries of the organ-isation. Two contemporary management perspectives – systems and contingency – are part of this approach..
The systems approach:
System: A set of interrelated and interdependent parts arranged in a manner that produces a unified whole.
Closed systems: Systems that are not influenced by and do not interact with their environment.
Open systems: Systems that interact with their environment.
Systems theory is a basic theory in the physical sciences but had never been applied to organised human efforts.
In 1938, Chester Barnard, a telephone company executive, wrote in his book, The Functions of an Executive, that an organisation functioned as a cooperative system. However, it was not until the 1960s that management researchers began to look more carefully at systems theory and how it related to organisations.
an organization from an open systems perspective.
you can see, an organization takes in inputs (resources) from the environment and transforms or processes these resources into outputs that are distributed into the environment.
The systems approach and managers:
How does the systems approach contribute to our understanding of management?
Systems researchers envisioned an organisation as being made up of ‘interdependent factors, including individuals, groups, attitudes, motives, formal structure, interactions, goals, status, and authority’.
What this means is that as managers coordinate the work activities of the various parts of the organisation, they ensure that all these parts are working together so that the organisation’s goals can be achieved.
For example, the systems approach recognises that, no matter how efficient the production department might be, if the marketing department does not anticipate changes in customer tastes and work with the product development department in creating products customers want, the organisation’s overall performance will suffer.
Consider this example in the context of Ford’s experiences in its car manufacturing operations, which we described earlier in the chapter, and you will start to realise the importance of the systems concept.
In addition, the systems approach implies that decisions and actions taken in one organizational area will affect others, and vice versa.
For example, if the purchasing department does not acquire the right quantity and quality of inputs, the production department will not be able to do its job effectively.
Finally, the systems approach recognises that organisations are not self-contained.. They rely on their environments for essential inputs and as outlets to absorb their outputs. No organisation can survive for long if it ignores government regulations, supplier relations or changes in customers’ buying preferences
Think, for example, of a day-shift manager at a local McDonald’s outlet who every day must coordinate the work of employees filling customer orders at the front counter and the drive-through windows, direct the delivery and unloading of food supplies, and address any customer concerns that are raised. This manager ‘manages’ all parts of the ‘system’ so that the restaurant meets its daily sales goals..
The contingency approach:
contingency approach :A management approach that says that organizations are different, face different situations (contingencies) and require different ways of managing.
The early management theorists such as Taylor, Fayol and Weber came up with management principles that they generally assumed to be universally applicable. However, later research found exceptions to many of their principles.
For example, division of labour is valuable and widely used, but jobs can become too specialized. Bureaucracy is desirable in many situations, but in other circumstances other structural designs are more effective.
Management is not (and cannot be) based on simplistic principles that can be applied in all situations. Different and changing situations require managers to use different approaches and techniques.
The contingency approach (sometimes called the situational approach) says that organisations are different, face different situations (contingencies) and require different ways of managing.
A good way to describe contingency is ‘if, then’. If this is the way my situation is, then this is the best way for me to manage in this situation.
The contingency approach and managers:
A contingency approach to management is intuitively logical, because organisations and even units within the same organisation are diverse – in size, goals, work, and the like. It would be surprising to find universally applicable management rules that would work in all situations.
to say that the method of managing ‘depends on the situation’, and another to say what the situation is.
Management researchers have been working to identify these ‘what’ variables. Table 2.4 describes four popular contingency variables.
The list is by no means comprehensive – more than 100 different ‘what’ variables have been identified – but it represents those most widely used and gives you an idea of what we mean by the term contingency variable. The primary value of the contingency approach is that it stresses that there are no simplistic or universal rules for managers to follow.
Current trends and issues:
(Provide examples of current trends and issues that are influencing management today.)
Where are we today? What current management concepts and practices are shaping ‘tomorrow’s history’?
In this section, we will attempt to answer those questions by introducing several trends and issues – external environmental influences and changing organisational circumstances – that we believe are changing the way managers do their jobs.
We introduced you to three important trends in Chapter 1 – customer service management, innovation and sustainability.(CSM,I and S) etc.
we will examine others, including
Customer Service Management
ethics, workforce diversity,
knowledge management and
learning organizations, and
Managing for sustainability.
Globalization: Managers are no longer constrained by national borders. China has now entered the world car manufacturing market and is building cars in Europe as well as in China.
McDonald’s sells hamburgers on every continent except perhaps Antarctica.
Toyota now makes a hybrid car in Australia.
The Global Financial Crisis of 2007–10 was triggered by a liquidity crisis in the US banking system and affected organisations and businesses in almost every country in the world.
Danish toymaker Lego Group opened factories and a distribution centre in the Czech Republic. Swiss company ABB Ltd constructed power-generating plants in Malaysia, South Korea, China and Indonesia. As these examples illustrate, the world has definitely become a global village, leading to important changes in the manager’s job.
Working with people from different cultures:
Even in your own country, you are likely to find yourself working with bosses, peers and other employees who were born or raised in different cultures. What motivates you may not motivate them. Or your style of communication may be direct and open, but they may find this approach uncomfortable and threatening.
To work effectively with a group of diverse people, you will need to understand how their culture, geography and religion have shaped their values, attitudes and beliefs, and adjust your management style accordingly.
Coping with anti-capitalist backlash:
Capitalism’s emphasis on profits, efficiency and growth may be generally accepted in the United States, Australia and Hong Kong, but that emphasis is not nearly as popular in places such as France, the Middle East or the Scandinavian countries.
Managers at global companies such as Dell, Coca-Cola, McDonald’s or Nokia have come to realise that economic values are not universally transferable. Management practices need to be modified to reflect the values of the different countries in which an organisation operates.
Movement of jobs to countries with low-cost labour:
Globalisation means businesses can hire, source and sell wherever they want. It is increasingly difficult for managers in economically advanced nations such as Australia, where minimum wages in 2010 are typically A$15 an hour for full- or part-time adult workers, to compete against companies who rely on workers from developing nations where labour is often available for 30 to 40 cents an hour.
It is not by chance that a good proportion of Australians wear clothes made in China, work on computers whose parts came from Thailand, and ring up call centres operating from India.
In a global economy, jobs tend to flow to places where lower costs provide businesses with a comparative advantage.
This ‘outsourcing’ of jobs, however, has taken a new and unexpected turn, especially for those who think that the movement of jobs to countries with low-cost labour only affects factory workers and call-centre operators.
A number of low-cost countries are now graduating ‘large numbers of well-educated young people fully qualified to work in an information-based economy’.
The service-intensive economies of countries such as Australia and New Zealand are vulnerable to potential outflows of information-based jobs, as has been happening in relation to some of our telecommunications, financial services, airlines and other organisations that have outsourced various IT and service jobs to places such as India and the Philippines where the labour cost is considerably lower.
Such moves have often been widely criticised by both unions and customers.
Yes, globalisation can be controversial, as these issues show. Regardless of these controversies, managers in organisations of all sizes and types around the world have to confront the challenges of operating in a global market.
In 2005, former HIH Insurance director Rodney Adler and former HIH chief executive Ray Williams were sentenced for their roles and their actions in one of Australia’s largest corporate collapses, the 2001 collapse of HIH Insurance, which is estimated to have resulted in losses in the range of $2.7 to $4 billion. Williams was found guilty of considerable abandonment of duty and was imprisoned for a minimum of two years and nine months. Rodney Adler was found guilty of making false or misleading statements, which the sentencing judge described as displaying an appalling lack of commercial morality. For this he was imprisoned for a minimum of two years and six months. Sydney businessman Brad Cooper was also sentenced to a minimum of five years in prison for charges relating to bribes he paid a senior HIH official to push through false claims in the months before the insurer’s collapse.
In 2007, billionaire Richard Pratt and his Visy group of companies was fined an Australian record $36 million for breaches of the Australian Trade Practices Act, involving the establishment of a cartel with its rival Amcor and collusion in price fixing in the Australian cardboard box market.
There have been numerous examples in recent years of unethical behaviour, corporate lying, bribery, misrepresentation and financial manipulation.
What has happened to managerial ethics? Ethical behaviour seems to have been forgotten or ignored as these individuals and managers put their self-interest ahead of others who might be affected by their decisions.
His view is that the triggers for the crisis – the initial decisions in the United States to lend money to people who were unlikely to be able to repay loans, and then to rate these subprime mortgages as investment-grade assets – were unethical.
Although the investigations into the behaviour and practices of the financial companies on Wall Street have been one of the most widely publicised corporate ethics crises in recent years, executives at a number of other companies around the world – including Australia, as we described earlier – have also been engaging in similar kinds of unethical actions, where many investors have lost money or employees have lost jobs.
The prison sentences and fines imposed on these and other unethical corporate managers and directors can be seen as an attempt to send some powerful messages to the corporate world that dishonesty and breach of fiduciary duties will not be tolerated.
In today’s changing workplace, managers need an approach to deal with the complexities and uncertainties associated with the ethical dilemmas that arise.
First Manger to must understand the ethical dilemma they are facing. They need to step back and think about what issue (or issues) is at stake.
it is important to identify the stakeholders that would be affected by the decision.
What individuals or groups is it likely to affect? Third, managers should identify the factors that are important to the decision. These include personal, organisational and, possibly, external factors. We cover these factors in Chapter 5. Next, managers should identify and evaluate possible courses of action, keeping in mind that each alternative will impact on affected stakeholders differently.
As today’s managers manage, they can use this process to help them assess the ethical dilemmas they face and to develop appropriate courses of action.
Although most managers continue to behave in a highly ethical manner, the ethical abuses that were so widely publicised indicated a need to ‘upgrade’ ethical standards. This is being addressed at two levels.
First, ethics education is being widely emphasised in university and college curricula. Second, organisations themselves are taking a more active role in creating and using codes of ethics, providing ethics training programs and hiring ethics officers. We want to prepare you to deal with the ethical dilemmas you are likely to face.
Workforce diversity: A workforce that is more heterogeneous in terms of gender, race, ethnicity, age and other characteristics that reflect differences. Another issue facing managers in the 21st century will be coordinating work efforts of diverse organisational members in accomplishing organizational goals.
Today’s organisations are characterized by workforce diversity – a workforce that is more heterogeneous in terms of gender, race, ethnicity, age and other characteristics that reflect differences.
How diverse is the Australian workforce? According to data from the Australian Bureau of Statistics (ABS), in 2008 the Australian labour force comprised 11.1 million individuals, 26 per cent of whom (2.9 million) were born overseas.
The participation rate for overseas-born individuals was 61 per cent, compared with 68 per cent for those born in Australia.20 Australian society is made up of individuals who come from more than 200 countries from all parts of the globe.
The implications for effectively managing a more diverse workforce are enormous.
In fact, experts predict monumental workplace changes as more women, immigrants and members of minority groups enter the job market.
Smart managers recognize that diversity can be an asset because it brings a broad range of viewpoints and problem-solving skills to a company.
When the first wave of baby boomers (the population group encompassing individuals born between 1946 and 1964) is reaching or has reached 60 years of age. However, the impact may not be what you might expect.
New research suggests that boomers will have the ability – and the desire – to work productively and innovatively well beyond today’s normal retirement age.
Whatever the reason why older workers may decide to continue working, many companies have begun to recognise the extensive experience and knowledge that mature employees bring to the workplace. To slow the ‘brain drain’, more companies are looking to keep older workers by investing in training programs and flexible work schedules.
At the same time, the numbers of Generation X (born 1961–77) and Generation Y (born 1978–94) employees are increasing as a percentage of the workforce or, as in the case of the iGen (born 1995 onwards), are preparing to enter the workforce.
Each of these groups has expectations and attitudes in relation to the workplace that are quite different from those of the baby boomers.
Workforce diversity is not only a managerial issue in Australia and New Zealand. It is an issue facing managers of organisations in the United States, South Africa, Japan, Germany, Italy and other developed countries.
Does the fact that workforce diversity is a current issue facing managers mean that organisations were not diverse before? No. They were, but diverse individuals made up a small percentage of the workforce, and so organisations, for the most part, ignored the issue. Prior to the early 1980s, people took a ‘melting pot’ approach to differences in organisations.
It was assumed that people who were ‘different’ would automatically want to assimilate.
The process whereby an individual or a group of individuals uses organized efforts and means to pursue opportunities to create value and grow by fulfilling wants and needs through innovation and uniqueness, no matter what resources are currently controlled.
Entrepreneurship is an important global activity.26 But what exactly is it? Entrepreneurship is the process of starting new businesses, generally in response to opportunities. Three important themes are implied in this definition of entrepreneurship.
First is the pursuit of opportunities. Entrepreneurship is about pursuing environmental trends and changes that no one else has seen or paid attention to.
For example, Jeff Bezos, founder of Amazon.com, was a successful programmer at an investment firm on Wall Street in the mid-1990s.
He decided to quit his job and pursue what he felt were going to be enormous online retailing opportunities. Today, you can buy books, music, cars, furniture, jewellery and numerous other items on Amazon.
The second important theme in entrepreneurship is innovation. Entrepreneurship involves changing, revolutionising and transforming, and introducing new approaches – that is, new products or services or new ways of doing business.
An important theme in entrepreneurship is growth. Entrepreneurs pursue growth. They are not content to stay small or the same in size. Entrepreneurs work very hard to pursue growth, such as by continually looking for trends and exploring new products and new approaches.
entrepreneurship and growth does not have to be about a new and innovative product; frequently, it is about innovative business systems or methods.
For example, by developing and using more sophisticated information system technology, organisations can make considerable savings in forecasting and rostering staff, thereby lowering labour costs; or they can develop more efficient inventory control systems, resulting in lower warehousing costs.
it can be about using viral marketing on MySpace, Facebook and YouTube to spread the word about the company’s products, as Sumo Salad has been so successful in doing.
Entrepreneurship will continue to be important to societies around the world.28 Both for-profit and not-for-profit organisations will need to be entrepreneurial – that is, pursuing opportunities, innovations and growth – if they want to be successful.
you will find elements of entrepreneurship in many of the boxes and case studies presented in this text, as it is one of the critical aspects of management.
Knowledge management and learning organizations:
Do you have space for one ten-metre shelf filled with books? That would be your (and every other person’s) share if all the new information produced in a single year alone were divided equally worldwide.
Today’s managers confront an environment in which knowledge creation and change take place at an unprecedented rate.
As a result, many past management approaches and principles – created for a world that was more stable and predictable – no longer apply.
Organisations of the 21st century must be able to learn and respond quickly. organisations will be led by managers who can effectively challenge conventional wisdom, manage the organisation’s knowledge base and make needed changes.
Learning organizations: Organization that have developed the capacity to learn, adapt and change continuously.
Part of a manager’s responsibility is to create learning capabilities throughout the organisation – from lowest level to highest level and in all areas. How? An important step understands the value of knowledge as an important resource, just like cash, raw materials or office equipment.
Cultivating a learning culture where organizational members systematically gather knowledge and share it with others in the organisation so as to achieve better performance.
For instance, accountants and consultants at Ernst & Young, a professional-services firm, document best practices they have developed, unusual problems they have dealt with and other work information. This ‘knowledge’ is then shared with all employees through computer-based applications and COIN (community of interest) teams that meet regularly throughout the company.
Many other organisations – for example, General Electric, Toyota and Hewlett-Packard – have recognised the importance of knowledge management to being a learning organisation.
Managers must deliberately manage that base of knowledge. Knowledge management involves cultivating a learning culture where organisational members systematically gather knowledge and share it with others in the organisation so as to achieve better performance.
Managing for sustainability:
All sorts of organisations, from one-person businesses to large multinational conglomerates, are talking about developing sustainable operations through sustainable management practices. But what does this mean? In the 1987 Brundtland Report of the World Commission on Environment and Development entitled Our Common Future, sustainability was defined as ‘the ability of humanity to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs’.
The responsibility of all organisations to ensure that their operations use all forms of capital – human, natural and financial – in such a way that all stakeholders receive value, and that the capital required by future generations is maintained.
Sustainable management can therefore be said to be the responsibility of all organisations to ensure that their operations use all forms of capital – human, natural and financial – in such a way that all stakeholders receive value, and that the capital required by future generations is maintained.
Traditionally, businesses have assessed their performance against one bottom line – the financial one – their profitability. However, in the last few decades many businesses have moved beyond this and started to assess their performance against three bottom lines – environmental, social and economic.
Initially, this was seen mainly as a marketing or public relations activity designed to impress their stakeholders. But some of the organisations that followed this approach discovered that waste reduction, energy efficiency, pollution prevention, and a better social engagement with the communities in which they operated actually made economic sense.
Combined with the increasing awareness of climate change, world poverty, and water and energy scarcity, many organisations are now starting to understand that they need to change the way they operate. This has been further reinforced by the release of the Garnaut Climate Change Review in 2008, which highlights the need for Australia to address climate change by taking urgent action to reduce greenhouse gas emissions.
Thus, there is now a need to integrate environmental, social and economic considerations into every aspect of the organisation’s business practices, which will result in a higher degree of sustainability.
How sustainable management is actually put into action continues to evolve and change. In the past, many organisations proclaimed they were aiming to become more sustainable by doing relatively simple things such as recycling office paper, or increasing the use of recycled materials in products or packaging. Today, organisations have started to use energy, water and materials more efficiently, and to take other actions that reduce emissions and save money.
However, given the systemic nature of the world’s environmental, social and economic problems, there is a need to create even more balanced and sustainable outcomes. Tomorrow’s successful organisations will be those that are prepared to use innovative technologies and radically re-engineered business models where sustainability is not seen just as a sideline ethical consideration, but as a path to profits.
The leading edge of sustainable management is now moving beyond saving money to making money. In the leading organisations, sustainability is seen as a means of creating new business value that will result in increased sales, new and innovative products and services, and expanded markets.
Sustainable management is also seen as a way to reduce risk, enhance brand value and customer loyalty, and attract and retain employees.
The ‘New Industrial Revolution’ will be led by organisations that are able to apply sustainable management practices in order to gain a competitive advantage from fundamental changes in both production design and technology that better satisfy their customers’ needs, increase profits, and help to solve environmental and social problems all at the same time.
The threat of global warming and climate change is a problem that calls for new thinking and more innovative management approaches. It will require real change, because business-as-usual is no longer an option that the world can pursue as it tries to deal with this enormous challenge of the 21st century.
18. Explain why we need to look at the current trends and issues facing managers.
19. Describe the current trends and issues facing managers.
Learning outcome 2.1: Provide some examples of early management practice.
Studying history is important because it helps us see the origins of today’s management practices and identify what has and has not worked. We can see early examples of management practice in the construction of the Egyptian pyramids and in the arsenal of Venice. One important historical event was the publication of Adam Smith’s The Wealth of Nations, in which he argued the benefits of division of labour (job specialisation). Another was the Industrial Revolution, where it became more economical to manufacture in factories than at home. Managers were needed to manage these factories, and these managers needed formal management theories to guide them.
Learning outcome 2.2: Discuss the important contributions of scientific management.
Frederick W. Taylor, known as the ‘father’ of scientific management, studied manual work using scientific principles – that is, guidelines for improving production efficiency – to find the one best way to do those jobs. His four principles were: (1) use scientific methods to find the best way to do a job; (2) scientifically select, train and develop the workers; (3) ensure cooperation from the workers by offering incentives; and (4) allocate work and responsibilities to workers and managers. The Gilbreths’ primary contribution was finding efficient hand-and-body motions and designing proper tools and equipment for optimising work performance. Today’s managers use the concepts of scientific management when they analyse basic work tasks to be performed, use time-and-motion study to eliminate wasted motions, hire the best-qualified workers for a job, and design incentive systems based on output. All these practices are aimed at increasing the efficiency of an organisation’s operations.
Learning outcome 2.3: Explain the influences of general administrative theorists.
Fayol believed that the functions of management were common to all business endeavours but also were distinct from other business functions. He developed 14 principles of management from which many current management concepts have evolved. Weber described an ideal type of organisation, which he called a ‘bureaucracy’, as having characteristics that many of today’s large organisations still have. Today’s managers use the concepts of general administrative theory when they perform the functions of management and structure their organisations so that resources are used efficiently and effectively.
Learning outcome 2.4: Describe the quantitative approach.
The quantitative approach involves applications of statistics, optimisation models, information models and computer simulations to management activities. Total quality management is a management philosophy devoted to continual improvement and responding to customer needs and expectations. Today’s managers use the quantitative approach especially when making decisions as they plan and control work activities such as allocating resources, improving quality, scheduling work, or determining optimum inventory levels.
Learning outcome 2.5: Discuss the development and uses of the organisational behaviour approach.
The early OB advocates (Robert Owen, Hugo Munsterberg, Mary Parker Follett and Chester Barnard) contributed various ideas, but all believed that people were the most important asset of the organisation and should be managed accordingly. The Hawthorne Studies, which started as a scientific management experiment, dramatically impacted management beliefs about the role of people in organisations, leading to a new emphasis on the human behaviour factor in managing. The organisational behaviour approach has largely shaped how today’s organisations are managed. Many current theories of motivation, leadership, group behaviour and development, and other behavioural issues can be traced to the early OB advocates, the Hawthorne Studies, and the contributions from human relations and behavioural scientists.
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Learing Out come;
2.6: Clarify the systems and contingency approaches.
The systems approach says that an organisation takes in inputs (resources) from the environment and transforms or processes these resources into outputs that are distributed into the environment. It helps us to understand management, since managers must ensure that all the interdependent units are working together in order to achieve the organisation’s goals; it helps managers to realise that decisions and actions taken in one organisational area will affect others; and it helps managers to recognise that organisations are not self-contained, but instead rely on their environment for essential inputs and as outlets to absorb their outputs.
The contingency approach says that organisations are different, face different situations and require different ways of managing. It helps us to understand management, because it stresses that there are no simplistic or universal rules for managers to follow. Instead, managers must look at their situation and determine that, if this is the way my situation is, then this is the best way for me to manage.
Learning outcome 2.7: Provide examples of current trends and issues that are influencing management today.
Many changes have taken place during the early part of the 21st century that are directly affecting the practice of management. Globalisation, ethics, workforce diversity, entrepreneurship, knowledge management and learning organisations, and management for sustainability, are all examples of current trends and issues that are influencing today’s managers. Just like the impact of the Industrial Revolution in the 1700s on the emergence of management, today’s changes continue to influence the way organisations are managed.
Defining the manager’s terrain
Environment and organizational culture: The constraints
Managing in a global environment
Social responsibility and managerial ethics
Managing change and innovation
Managers are influenced by what is happening around them. No successful organization, or its managers, can operate without understanding and dealing with the dynamic terrain that surrounds it. One of the biggest problems managers make today is failing to adapt to the changing world.
As one executive said recently regarding the Global Financial Crisis, ‘I have learned more about management and leadership during the past six months than I had in the previous ten years.’ Organizations that are bound by tradition and do not (or refuse to) change are less and less likely to survive the turbulence in today’s world. To better understand this, we need to look at the important external environmental forces that are impacting the way organizations are managed today.
Which include the organizational environment, globalization, society’s expectations, and the need for change and innovation? we look at two constraints on how managers manage: the organization’s external environment and the organizational culture.
Environment and organizational culture: The constraints
We will look at culture and other important aspects of management’s context. We will examine the challenges in the external environment and discuss the characteristics of organizational culture. We first need to look at two perspectives on how much impact managers actually have on an organization’s success or failure. Focus on the following learning outcomes as you read and study this chapter:
3.1 Contrast the actions of managers according to the omnipotent and symbolic views.
3.2 Describe the four components in an organization’s specific environment.
3.3 Describe the six factors in an organization’s general environment.
3.4 Discuss the constraints and challenges facing managers in today’s external environment.
3.5 Identify some common stakeholders, and explain the steps in managing stakeholder relationships.
3.6 Discuss the characteristics and impact of organizational culture.
3.7 Explain the sources of an organization’s culture, and describe how it is transmitted to employees.
3.8 Describe some current issues in organizational culture.
The general environment:
The demographic conditions encompass trends in the physical characteristics of a population, such as gender, age, level of education, geographic location, income, family composition, and so forth – the type of information that the Australian Bureau of Statistics collects. Changes in these characteristics may constrain how managers plan, organise, lead and control.
‘Baby boomers’. This group typically includes individuals who were born between 1945 and 1960.
Through every life stage they have entered (going to primary school, teenage years, climbing the career ladder, and now the middle-age years), they have had an enormous impact because of their sheer numbers.
The First World War group (born 1922–27), the post-war group (born 1928–45), the Generation X (or ‘zoomers’) group (born 1961–77), Generation Y (born 1978–94) i Gen (1995 onwards).
The latter has been described as the digital or internet generation because members of this group have grown up with computer technology as part of their lives.9 Although each of these groups has its own unique characteristics, both Gen Y and iGen are of particular interest because they are learning, working, shopping and playing in fundamentally different ways that are likely to impact greatly on organizations and managers both as consumers and employees.10
But demographics does not only look at current statistics; it also looks to the future. For instance, recent analysis of birth rates shows that more than 80 per cent of babies being born worldwide are from Africa and Asia.11 And here is an interesting fact: India has one of the world’s youngest populations, with more males under the age of five than the entire population of France. And by 2050, it is predicted that China will have more people age 65 and older than the rest of the world combined.12 Consider the impact of such population trends on organizations and managers in the future!
We have automated offices, electronic meetings, robotic manufacturing, lasers, integrated circuits, faster and more powerful microprocessors, synthetic fuels, and entirely new models of doing business in an electronic age. Companies that capitalise on technology – such as Apple, Samsung, eBay and Google – prosper. An increasing number of companies are also adopting technologically advanced e-business systems to reduce the cost of inventory management, facilitate supplier interface and, in general, stay ahead of their competitors. Similarly, hospitals, universities, airports, police services and even non-profit organisations that adapt to major technological advances gain a competitive edge over those that do not.
Globalization is one of the main factors affecting managers and organisations. National borders are becoming increasingly meaningless in defining the boundaries of business. Advances in communication technology and reductions in cross-nation trade barriers have contributed to creating a truly global market.
So-called US companies such as ExxonMobil, Procter & Gamble, General Electric, Microsoft and Citigroup earn more than 60 per cent of their sales from outside the United States. And Toyota of Japan, Electrolux of Sweden, Nestlé of Switzerland, BHP Billiton of Australia and Royal Dutch Shell plc of the Netherlands are just five among the hundreds of corporations that operate in dozens of countries around the world. The near future will also see large, powerful corporations emerging out of China.
Assessing environmental uncertainty:
They differ by what we call their degree of environmental uncertainty, which is determined by two dimensions: degree of change, and degree of complexity in an organization’s environment
The first of these dimensions is the degree of change. If the components in an organisation’s environment change frequently, it is called a dynamic environment.
If change is minimal, it is called a stable environment. A stable environment might be one in which there are no new competitors, few technological breakthroughs by current competitors, little activity by pressure groups to influence the organisation, and so on.
Managers are always seeking new market opportunities and new hat models, yet the company’s environment is a relatively stable one in which change is infrequent. There are no sudden changes in suppliers, markets or technologies.
In contrast, the recorded music industry faces a highly uncertain and unpredictable environment. Digital formats such as MP3 and music-downloading sites such as iTunes have turned the industry upside down. Although music companies traditionally earned revenues by selling physical commodities such as LP records, cassettes and CDs, changing digital technology represents chaos and uncertainty due to the ease of making perfect copies through largely illegal means.
What about rapid change that is predictable? Is that considered a dynamic environment? Retail department stores such as David Jones and Myer are a good example. They typically make one-quarter to one-third of their sales in December, due to the Christmas frenzy.
However, because the change is predictable the environment is not considered to be dynamic. When we talk about degree of change, we mean change that is unpredictable. If change can be accurately anticipated, it is not an uncertainty managers must confront.
Dimension of uncertainty describes the degree of environmental complexity. ‘Degree of complexity’ refers to the number of components in an organization’s environment and the extent of the knowledge that the organization has about those components.
Complexity is also measured in terms of the knowledge an organization needs to have about its environment.
How does the concept of environmental uncertainty influence managers?
The four cells represents a different combination of degree of change and degree of complexity. Cell 1 (an environment that is stable and simple) represents the lowest level of environmental uncertainty.
Cell 4 (an environment that is dynamic and complex) represents the highest. Not surprisingly, managers’ influence on organizational outcomes is greatest in cell 1 and least in cell 4.
Since uncertainty is a threat to an organization’s effectiveness, managers try to minimize it.
Managing the stakeholder relationship:
Stakeholders: Any constituencies in the organization’s external environment that are affected by the organization’s decisions and actions.
One reason was that then-CEO Michael Chaney (now chairman of National Australia Bank) knew the importance of building relationships with the organisation’s various external stakeholders: customers, shareholders, suppliers, employees, media and others.
The nature of external stakeholder relationships is another way in which the environment influences managers. The more obvious and secure these relationships become, the more influence managers will have over organisational outcomes.
Who are stakeholders? We define them as any constituencies in the organisation’s external environment that are affected by the organisation’s decisions and actions. These groups have a stake in or are significantly influenced by what the organisation does.
Note that these stakeholders include internal and external groups. Why? Because both can affect what an organisation does and how it operates. However, we are primarily interested in the external groups and their impact on managers’ discretion in planning, organising, leading and controlling.
Why is stakeholder relationship management important? Why should managers even care about managing stakeholder relationships?
One reason is that it can lead to other organizational outcomes, such as improved predictability of environmental changes, more successful innovations, greater degrees of trust among stakeholders, and greater organizational flexibility to reduce the impact of change.
More successful innovations, greater degrees of trust among stakeholders, and greater organisational flexibility to reduce the impact of change.
Management researchers who have looked at this issue are finding that managers of high-performing companies tend to consider the interests of all major stakeholder groups as they make decisions.
Managing external stakeholder relationships is that it is the ‘right’ thing to do. What does this mean? It means that an organisation depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services), and managers should consider their interests as they make decisions and take actions.
How can these relationships be managed? There are four steps. The first step is identifying who the organisation’s stakeholders are.
Those external groups that are likely to be influenced by and to influence organisational decisions are the organisation’s stakeholders.
Managers to determine what particular interests or concerns these stakeholders might have – product quality, financial issues, safe working conditions, environmental protection, and so on.
Managers must decide how critical each stakeholder is to the organisation’s decisions and actions.
How critical is it to consider this stakeholder’s concerns as manager’s plan, organise, lead and control?
The very idea of a stakeholder – a group that has a ‘stake’ in what the organisation does – means that it is important.
Organizations are not self-contained or self-sufficient. They interact with and are influenced by their environment. Organisations depend on their environment as a source of inputs and as a recipient of their outputs.
Discuss the two dimensions of environmental uncertainty.
Identify the most common organizational stakeholders.
Explain the four steps of managing external stakeholder relationships.
Organizational culture: Constraints and challenges
Introduction: the influence of the external environment an organization’s internal environment also constrains managers in what they can do, at least in the short term. We know that every person has a unique personality – a set of relatively permanent and stable traits that influence the way we act and interact with others. n the manager’s ability to achieve certain outcomes. We describe someone as warm, open, relaxed, shy or aggressive, we are describing personality traits. An organization, too, has a personality, which we call its culture.
What is organizational culture?
Organizational culture: The shared values, principles, traditions and ways of doing things that influence the way organizational members act. In most organizations, these shared values and practices have evolved over time and determine, in large degree, what employees perceive about their organizational experiences and how they behave in theorganisation.21 Just as tribal cultures have rules and taboos that dictate how members will act towards each other and outsiders, so organizations have cultures that govern how their members should behave. When confronted with problems or work issues, the organizational culture – ‘the way we do things around here’ – influences what employees can do and how they view, define, analyses and resolve problems and issues.decisions and actions. These groups have a stake in or are significantly influenced by what the organisation does.
Introduction: the influence of the external environment an organization’s internal environment also constrains managers in what they can do, at least in the short term. We know that every person has a unique personality – a set