Understanding business organisations with reference to management theories

There are few records of ancient management methods surviving.

The development of management as a body of knowledge is recent. The industrial revolution of the late 1700s encouraged the growth of factories and acted as a catalyst for developing management theories. People started writing about innovative ways of running factories to make them more efficient.

The last 200 years has seen the development of a number of influential management theories.

No one theory is universally accepted, rather, each theory offers something of value to modern managers.

Management theories influence:

The classical approach was pioneered by Max Weber and Henri Fayol. According to Weber, a bureaucracy is the most efficient form of organisation and should have:

He also developed a number of principles to assist managers, including:

Frederick W. Taylor (1856-1915) advocated the production line method of manufacturing because of its efficiency. He had a classical view of management: emphasising how best to manage and organise work more efficiently so as to improve productivity.

Taylor developed the 4 principles of scientific management- an approach that studies a job in great detail to discover the best way to perform it:

Taylor believed a poorly skilled workforce could be trained to perform simple repetitive tasks to a minimum standard.

He also believed employees follow their own self-interest and try to avoid work- this requires tight control by supervisors and a bureaucratic organisation- many rules and regulations.

Henry Ford is one of the most notable followers for classical-scientific theory.

Planning is the preparation of a course of action for a business in the short, medium and long-term. It includes setting the Mission Statement and organsiational objectives.

Once objectives have been determined, decisions need to be made as to how to achieve them. They will be achieved through strategic, tactical and operational planning.

The 2nd step in the management process is organising where the objectives set in the planning stage are put into practice- the financial, human and material resources are organised to achieve objectives. The planning stage is translated into outcomes.

The organisation process involves:

Activities undertaken include:

Controlling is monitoring the planning, leading and organising processes to ensure that the objectives of the organsiation are being met- performance is compared to objectives, if there is a discrepancy changes and improvements may need to made. Checking may take place at the end of the process or throughout processes.

Steps in the Control process:

Benchmarking compares strengths and weaknesses of an organisation against those of other businesses, with the aim of reforming those processes that are not achieving the organisation's objectives. It can be internal- between different divisions or operation, or external, between businesses producing the same product or using the same production process.

Adam Smith found that when businesses change their organisational structure, particularly when operations are broken up into smaller and more specialised tasks, productivity increases. This is called the division or specilisation of labour.

In theory, the more complex tasks are broken up into specialised jobs, the more efficiently an organisation can use its resources.

Traditional organisational structures were pyramid-shaped and hierarchical- people were grouped together according to the specialised functions they perform. Characteristics of this structure include:

Leadership styles can be placed on a continuum from: Autocratic or authoritarian (high task/low process) to Participative or democratic to Laissez-faire (low task/high process). The 4 main types of leadership approaches are:

Classical-scientific managers often adopt an autocratic leadership style- one manager tends to make all he decisions, dictating work methods, limiting worker knowledge about what needs to be done to the next step to be performed, and sometimes giving feedback that is punitive.

This style may be effective in times of crisis when immediate compliance is needed.

Politics in this sense is the use of methods, sometimes unstated and/or unethical, to obtain power or advancement within an organisation.

Orgnisational politics are often the unwritten rules of work life. They involve the pursuit of self-interest through informal methods of gaining power or advantage.

While the formal organisational structure, size, technology and business environment are important in how the business organisation functions, they are much less important compared to the accumulated impact of workplace politics and power struggles.

Managers need to have an understanding of the role of power, negotiation and bargaining, identifying or forming coalitions and manaing conflict among various stakeholders.

 Power is the ability to gather together resources to get something done. It is necessary to make an organisation function effectively.

Power comes from 5 sources:

Different sources will be used in different situations- for example, coercive and reward power may be used in emergency situations or where there is a deadline.

Negotiating or bargaining becomes necessary within organisations because employee goals, as well as the goals of other stakeholders, are sometimes in conflict with management goals.

Managers should seek a win-win solution for stakeholders- agreements or solutions are mutually beneficial and satisfying; all parties feel good about the decision.

A coalition is two or more people who combine their power to push or gain support for their ideas.

Most organisations have two distinct groups- those in power and those out of power, as well as those who want to get in power. If people cannot achieve their goal individually they will form coalitions- strength in numbers.

For every organisation there is a formal aspect and an even larger informal aspect.

Formal organisation:

Informal organisation:

A manager adopting a political perspective will view the success of the business as a balance between competing stakeholder demands- his/her role involves monitoring changes within stakeholder expectations.

A stakeholder audit involves identifying all the parties that could be affected by the business's performance and decisions.

See textbook pp66-67

Systems theory is based on the idea that businesses can be viewed as systems- sets of interrelated parts that operate as a whole in order to achieve a common goal.

The systems management approach views all organisations as an integrated process where all the individual parts contribute to the whole. Each individual is autonomous but also interdependent.

Organisations are made up of these main components:

Characteristics of the systems approach:

Contingency theory stresses the need for flexibility and adaptation of management practices and ideas to suit changing circumstances.

Managers should be flexible and adaptive, taking the best out of each theory to suit their needs and situation.

The ten commandments of the modern manager:

See textbook pp.71-72