MANAGERIAL PERSPECTIVES: The Evolution of Management Thinking
By Dr. Mahasena Senanayake PhD.
Modern business organisations across the world are faced with volatile business landscapes regardless of their differences in scale, sector and geographical locations. The methods and patterns that kept these organisations successful in the past, no longer seem enough to keep them thriving in today's turbulent environment.
Unexpected market forces or other changes in the environment can devastate a company. Retail chains such as USA's Kmart and Sears are fighting to stay alive in the face of Wal-Marts growing dominance. Major airlines in the United States are being hammered by new low-cost carriers such as Jet Blue.
Widespread financial and ethical scandals in the early 2000s have affected companies in all industries. Hence as a case in point the Butheran Health Network in the USA which runs six hospitals in and around Fort Wayne Indiana, now spends about USD 250,000 more per year to make sure the organisation has documentation to show they are complying with health care regulators and other over-sight boards.
Confronted by ever shifting conditions, modern managers have to make continual changes in their organisations and sometimes create a new kind of company with which they have little experience or skill. However, management philosophies and organisational forms must change over time to meet these new needs.
A 'Historical perspective' which facilitates a study of the past and contributes to the understanding of the present should be taken to further enable the pathways to grasp an overview of the ideas, theories, and management philosophies that have evolved to make the workplace what it is today in a global context.
Strategic thinking, seeing the big picture, and improved conceptual skills enables us to examine how social, political and economic forces have influenced organisations and the practice of management. Social forces refer to those aspects of a culture that guide and influence relationships among people.
These forces shape what is known as the social contract, which refers to the unwritten, common rules and perceptions about relationships among people and between employees and management. Political forces refer to the influence of political and legal institutions on people and business organisations, political forces also include basic assumptions underlying the political system, such as the desirability of selfgovernment, property rights, contract rights, the definition of justice, and the determination of innocence or guilt of a crime.
The spread of capitalism and the dominance of the free market systems and the growing interdependencies among the world’s countries require organisations to operate differently and managers to think in new ways. Economic forces pertain to the availability of production, and distribution of resources in a society. Governments, military agencies, churches, schools and business organisations in every society require resources to achieve their goals, and economic forces can influence the allocation of scarce resources.
The nature of economic decision making is undergoing significant changes. Today’s economy is based as much on ideas, information, and knowledge as it is on material resources. Supply chains and distribution of resources have been revolutionised by digital technology. Surplus inventories, which once could trigger recessions, are declining or completely disappearing.
A massive shift in the economy is not without its upheavals of course. Hence, management practices and perspectives vary in response to these social, political and economic forces in the larger society. During difficult times, managers look for ideas to help them cope with environmental turbulence and keep their organisations vibrant.
Challenges such as a tough economy and a rocky stock market, environmental and organisational crises, lingering anxieties over war and terrorism, and the public suspicion and scepticism resulting from corporate scandals, leave executives searching for any management tool, new or old, that can help them to get the most out of limited resources.
The Classical Perspective
The 'classical perspective' on management of the business organisation emerged during the 19th and early 20th Centuries. The development of the factory system brought about new challenges such as: tooling the plants, organising managerial structures, training employees, scheduling complex manufacturing operations and dealing with labour dissatisfaction and resulting strikes.
These new dynamics have led to the development of three subfields in management, each with a slightly different emphasis: scientific management, bureaucratic organisations, and administrative principles. Limited success in achieving improvements in labour productivity led Taylor (1915) a young engineer to associate this syndrome to poor management practices than to labour.
Hence, the label scientific management emerged. Taylor advocated the fact that decisions based on rule of thumb and tradition should be replaced with precise procedures developed after careful study of individual situations. The basic idea of scientific management dramatically increased productivity across all industries and they are still important today and the concept of arranging all operations based on careful analysis of tasks for maximum productivity is well entrenched in our business entities.
However, the harmony and cooperation which was envisaged within the scientific management model is often absent as the social context and worker needs are mostly ignored. The bureaucratic organisations approach to management a subfield within the classical perspective and developed in Europe looked at the organisation as a whole, which needed to be managed on an impersonal, rational basis thus avoiding the dysfunctional personalised approach to resource usage in particular. Max Weber (1947) who propounded this approach classified the business organisation as a bureaucracy as indicated in the exhibit 01. Characteristics of Weberian Bureaucracy
Source : Weber (1947)
Weber believed that an organisation based on rational authority would be more efficient and adaptable to change because continuity is related to a formal structure and position rather than individuals who may leave or die. Employee selection, advancement was envisaged based on technical qualification and competence exclusively as assessed by examination or according to training and experience.
The bureaucratic model of management also relied on rules and written records for continuity. Rules and procedures were impersonal and uniformly applied distinct definitions of authority and responsibility and legitimised official duties was the order of the day. Distinct positions organised in a hierarchy with each position under the authority of a higher one where the manager does not depend on his or her personality to convey his instructions, but on the legal powers invested in the managerial position was a marked feature of a bureaucratic organisation.
In contrast, the term bureaucracy has taken on a negative meaning due to endless rules and red tape although they provide a standard but equal way of treating employees. The bureaucratic foundation enables many organisations to become extremely efficient, adaptable to change in given contexts. As a case in point the U.S.-based United Parcel Service (UPS), sometimes called 'Big Brown' took on the U.S. postal service at its own game and won, gained market share in air service, logistics and information services by adopting the concept of bureaucracy.
UPS is bound up in rules and regulations. It teaches drivers an astounding 340 steps for how to correctly deliver a package, get supervisors to conduct three-minute inspections of drivers each day. Every manager is given bound copies of policy books and is expected to use them. UPS has welldefined division of labour, thrives on written records, and has been a leader in using new technology to enhance reliability and efficiency.
Drivers use a computerised clipboard to track everything from miles per gallon to data on parcel delivery. All drivers have daily worksheets, performance goals and should rely on technical qualifications for hiring and promotions. The UPS policy book forbids favouritism. The bureaucratic model works just fine at UPS, ‘the tightest ship in the shipping business.’ Another subfield within the classical perspective is known as the administrative principles approach.
Whereas the traditional scientific management focused on productivity of the individual worker, the administrative principles approach focused on the total organisation. Henri Fayol (1841-1925) a French mining engineer specified his concepts on administration based largely on his own management experiences. Fayol discussed 14 general 'principles' of management, several of which are part of management philosophy today.
Unity of command: Each subordinate receives orders from oneand only one supervisor.
Division of work: Managerial and technical work are amenable to specialisation to produce more and better work with the same amount of effort.
Scalar chain: A chain of authority extends from top to the bottom of the organisation and should include every employee.
Unity of direction: Similar activities in an organisation should be grouped together under one manager. Fayol felt that the principles could be applied in any organisation and simultaneously identified five basic functions or elements of management: planning, organising, commanding, coordinating and controlling.
These functions underline much of the general approach to today’s management theory. The classical perspective as an approach to management was very powerful and strongly enabled companies with fundamental new skills for establishing high productivity and effective treatment of employees. The United States surged ahead of the world in management techniques and other countries like Japan borrowed heavily from American ideas.
The Humanistic Perspective
The humanistic perspective on management advocated the importance of understanding human behaviours, needs and attitudes in the workplace as well as social interactions and group processes. The human relations movement, the human resource perspective and the behavioural sciences approach usually depict the various subfields. Based on the spirit of equality, power sharing between managers and workers was considered a contentious issue as the human relations school of thought considered that truly effective control comes from within the individual worker rather than from strict authoritarian control.
This position was taken as this school of thought recognised and acknowledged the existence of social pressures for enlightened treatment of corporate employees. However, industrial psychology received less attention at that time due to the prominent role played by scientific management across the business landscape. Then a series of studies at the Chicago Electric Company, which came to be known as the Hawthorne Studies, changed the dynamics between the employer and employee amidst a work relationship.
As propounded by two eminent Harvard Professors, Elton Mayo and Fritz Roethlisberger it was believed that factors that best explained increased output was human relations. This approach shaped management theory and practice for over a quarter century, and the belief that human relations is the best approach for increased productivity persists today. Another subfield within the humanistic perspective is the ‘human resource' viewpoint which maintained an interest in worker participation and considerate leadership, but shifted the emphasis to consider the daily tasks that people perform.
In the human resource view, jobs should be designed so that tasks are not seen as dehumanising, but instead allow workers to use their full potential. Abraham Maslow and Doughas McGregor are the chief proponents of this type of thinking. Maslow by introducing his hierarchy of needs stressed the requirement to satisfy human needs such as physiological needs and other needs considered as safety, belongingness, esteem and finally self-actualisation to bring about efficient, effective and economical human resource management.
Hence, McGregor believed that the 'classical perspective' was based on theory x assumptions and the proposed theory y, it being more realistic allowing organisations to take advantage of the imagination and intellect of all their employees. Theory y assumes employees will exercise self-control and will contribute to organisational goals when given the opportunity. However, many companies still use theory x management coupled with theory y techniques. The USA-based Signet Painting Inc is one such organisation.
The behavioural sciences approach is another subset of the humanistic perspective which develops theories about human behaviour based on scientific methods and study. Behavioural science draws from sociology, psychology, anthropology, economics, and other disciplines to understand employee behaviour and interaction in an organisational setting. One set of management techniques based on the behavioural sciences approach is Organisation Development (OD), which is a separate field that applies the behavioural sciences to improve the organisation's health and effectiveness through its ability to cope with change, improve internal relationships, and increase problemsolving capabilities.
Other concepts that grew out of the behavioural sciences approach include matrix organisations, self-managed teams, ideas about corporate culture, and management by wondering around. Behavioural sciences approach has influenced the majority of tools, techniques and approaches that managers have applied to business organisations since the 1970s and together with OD techniques helped managers to build learning organisations. General Electric (GE) Inc and the Circuit City Electronics Stores (USA) were seen to adopt management techniques which were rooted in the behavioural science approach to management of the human resource.
The Management Science Perspective
The massive and complicated problems associated with global warfare in the modern times required managerial decision makers to adopt sophisticated tools than ever before. The management science perspective succeeded in addressing those problems. This view was distinguished by its application of mathematics, statistics and other quantitative techniques to management decisionmaking and problem-solving.
These techniques had obvious applications to large-scale business firms globally and even within Sri Lanka. One of the major fallouts of the management science perspective was the technique popularly known an 'operational research' which involved model building and other applications of quantitative techniques to managerial problems. 'Operations management' was another spinoff technique of management which specialised in physical production of goods and services.
Quantitative techniques were used to solve manufacturing problems and were popularly identified as: forecasting, inventory modelling, linear and nonlinear programming, queuing theory, scheduling, simulation and breakeven analysis. Information technology (IT) is the most recent subfield of the management science perspective and is often reflected in management information systems (MIS) which are designed to provide relevant information to managers in a timely and cost-efficient manner.
In today’s context IT has evolved within organisations to include intranets and extranets, as well as various software programmes that help managers to estimate Costs, plan and track production, manage projects, allocate resources or schedule employees. Most of today's business entities have departments of information technology where specialists use management science techniques to solve complex organisational problems.
The Recent Historical Trends
Three recent trends have emerged out of the humanistic perspective and are categorised as systems theory, the contingency view and total quality management. 'A system' is set of interrelated parts that function as an organisational whole to achieve a common purpose. Systems theory as depicted in the exhibit 02 distinctly identifies five components : inputs, a process, out puts, feedback and the environment in the context of a company.
The inputs are related to the key business resources, the process relates to the conversion activities, outputs include the products and services, feedback are the results that influence the next input cycle of the process. The environment surrounding the organisation includes the social, political and economic forces distinctly identifiable and seen to impact the organisation.
The Systems View of the Organisation
Some 'ideas' in systems theory distinctly affected management thinking. They include open systems which must interact with the environment to survive whilst closed systems, the alternate need not. Entropy is a universal property of systems and refers to their tendency to run down and die. If a system does not receive fresh inputs and energy from its environments, it will eventually cease to exist.
Synergy in a system environment means that the whole is greater than the parts. Finally it could be said that subsystems depend on one another as parts of a system. Changes in one part of the organisation affect other parts. The organisation must be managed as a coordinated whole. Another recent and contemporary extension of management thinking is the contingency view. The classical perspective assumed a universal view whilst the contingent view means that a manager's response depends on identifying key contingencies in an organisational situation.
Important contingencies that managers must understand include industry, technology, the environment and international cultures. Management practises in a rapidly changing industry for example, will be very different from those in a stable one. When we consider recent historical trends the Total Quality Management (TQM) technique which focuses on managing the total organisation to deliver quality to customers, was at the forefront in helping managers deal with global competition.
The approach imbues quality values across every activity within a company with frontline workers intimately involved in the process. The most significant elements of quality management are employee involvement, focus on the customer benchmarking and continuous improvement. In today’s business landscape even within Sri Lanka, management thinking has been inculcated by dozens of ideas and techniques in current use that can trace their roots to historical perspectives.
Additionally innovative concepts continue to emerge to address management challenges in today’s turbulent world. Business organisations in Sri Lanka and world over continue to experiment with new ways of managing that more adequately respond to demands of today’s environment and customers. Two of the most current innovations in management thinking are the shifts to a learning organisation and managing the technology influenced and driven workplace.
The writer is a Senior Chartered Accountant cum Academic Associated with the Public Sector University System. He also Functions as a Financial Management Consultant and a Management Trainer. Contactable at [email protected]