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Historical and Contemporary Theories of Management
Overview
The idea of management is not new. Early forms of management concepts have been
applied throughout history in order to progress as a society. Could Stonehenge have
been built without the management of all of the required tasks? What about the Mayan
or Egyptian pyramids? Could the stones for these monuments have been found, cut,
and moved without a plan? Management activities were needed in order to complete
these massive projects.
In this reading, we will explore some of the early theories of management, although we
will not be able to go as far back as the Mayans or Egyptians. We will start in the late
18th century and then work our way up to current and contemporary 21st century
concepts.
Early Management Theories
The Industrial Revolution as well as the growth of factories and mass production
created a need for strong management processes. Better and more efficient ways of
manufacturing goods were needed in order to maximize productivity, bring down costs,
and increase profitability. As a result, since the late 1800’s, theorists have developed a
wide range of methods for improving management practices.
As discussed earlier in this subunit, Frederick Winslow Taylor was an early pioneer of
management theory. In this reading, we will discuss Taylor’s management approach
and other early management theories, and then move on to more modern approaches.
The Scientific Approach
Taylor was the founder of the Scientific Approach to management, which focused on
efficiency of movement and the task at hand. By designing the job appropriately, his
theory postulates that the worker would be motivated to be more efficient and
productive. Taylor’s Scientific Approach to management changed the purpose and
scope of factory employees. His practices changed the role of managers from one of
bullying workers to complete their jobs and turned them into skilled employees who
could supervise an individual aspect of production with the goal of efficiently increasing
production.
There were, of course, criticisms of this approach, which claimed that workers were not
allowed to express any individuality in their work. Critics also claimed that this approach
gave greater power to management and reduced workers to automatons. However,
Taylor’s intentions were good in that he linked productivity and output with financial gain
so that more productive workers would earn more money. His goals also included
making the workplace safer so that workers would have fewer injuries on the job. In fact,
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many of Taylor’s methods can still be seen in today’s modern management approaches.
The assembly line, pay-related performance, financial incentives, bonuses, and total
quality management are among some of the current practices commonly used by
management.
The Administrative Approach and the Bureaucratic Approach
Within the Scientific Approach to management are two other sub-theories: the
Administrative Approach and the Bureaucratic Approach. The Administrative Approach
was pioneered by Henri Fayol, who developed his management theory in 1916.
Influenced by Taylor’s publication of The Principles of Scientific Management in 1911, it
is unclear whether Fayol was a theorist with original ideas or whether he was a good
manager who took management practices to their next level of evolution. Like Taylor,
Fayol was an engineer who was a manager in French mines. Fayol believed that
management was part of all aspects of our lives and society including home, work, and
government. He believed that all of the tasks required to conduct our lives could be
categorized into one of five functions: planning, organizing, commanding, coordinating,
and controlling. He believed that individuals could become good managers if they
understood and implemented proper management principles.
Planning refers to forecasting and determining what will be needed in the future.
Organizing involves gathering all the necessary resources, both in terms of raw
materials and manpower.
Commanding results in all of the required activities being done, as needed.
Coordinating is the logistics of ensuring that all jobs are conducted in a
synchronized manner and that everyone involved is working as a unified team.
Controlling means that all rules and regulations are followed and adhered to.
Also, during the time of Taylor’s Scientific Approach, the Bureaucratic Approach was
proposed by Max Weber, a sociologist from Germany. His approach focused on
hierarchical structure, which provided clear designations of authority, giving managers a
type of legal control over their employees. Managers, he stated, would be followed
simply because of their elevated position. Weber viewed each organization as a
bureaucracy with goals to be met at the expense of individuality or personal
contribution. His practices enabled companies to operate more efficiently. However,
requiring all managers and workers to adhere to a strict set of guidelines limited
workers’ creativity and the ability to adapt to change.
The Human Relations Approach
In the early 1920’s, Elton Mayo, a professor at Harvard, observed the importance of
human interaction and personal relationships in the work place. Led by Mayo,
experiments in working conditions and social factors were conducted at the Western
Electric company at their Hawthorne plant. These became known as the Hawthorne
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Studies. The experiments sought to understand the effects of various working
conditions on employees’ productivity. Conditions incorporated into the experiments
included varying the room’s lighting levels, number of employee rest breaks, required
working hours, availability of meals, room temperature variations, and other
environmental workplace changes.
The results were quite surprising: at each stage of the experiments, productivity
climbed! Employees felt that management valued them as individuals simply because of
the implemented changes. It signaled that they were cared about. Additionally,
employees who were part of the experimental groups formed great social bonds, saw
themselves as part of a select group, and felt that they had the freedom to make
workplace choices. Even when employees went back to their original working hours and
conditions, productivity continued to be at high levels.
The Hawthorne Studies proved that meeting social needs of workers could enhance the
workplace and positively impact productivity. Just as the Scientific Approach brought a
new perspective to management, the Hawthorne Studies changed the role of
management yet again. The scientific movement focused on required tasks and viewed
managers as taskmasters, while the Human Relations Approach took into consideration
the importance of group dynamics, teamwork, and the positive impact of social
interaction. In this new era, managers’ roles included care and concern for the workers’
needs and well-being.
As the Human Relations Approach to management continued to progress through the
early 20th century, it became more and more apparent that one’s employment was not
only for making money and being able to support a family. In fact, people had social
needs that were also being met in the workplace. In 1943, Abraham Maslow presented
his Hierarchy of Needs Theory, which was all about motivation and personal
development.
Other humanist theorists followed—e.g. Herzberg’s studies to increase motivation and
involvement resulted in his motivation-hygiene theory of job satisfaction. McGregor
proposed his Theory X/Theory Y approach. Theory X was a negative theory; this theory
said that managers should assume that workers are lazy and required threats as a
means of motivation. Theory Y categorized workers as able to and wanting to work
hard. This theory takes the view that individuals can be defined by either of these
extremes, an approach that today’s managers are hesitant to adopt.
Modern Theories of Management
Systems Approach
The Systems Approach to management sought to find an equal balance between
the extremely impersonal Scientific Approach and the individually-focused Human
Relations Approach. In this approach, we look at all of the components of an
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organization as part of one larger system. However, in order to understand the entire
system, we must first be able to recognize the role each division and department plays
within the whole system. These divisions or departments are known as sub-systems.
Each sub-system can be viewed as its own entity to see how it fits into the entire
organization and to determine the role it plays in the larger system.
Biologist Ludwig von Bertalanffy first introduced the idea of a systems approach
as part of his General Systems Theory, which he used to explore the relationships
between organisms and the environment. Von Bertalanffy wanted to further identify the
connection between business organizations and their environment. To do this, he
explored the relationships between employees, customers, and company output. His
theories can best be illustrated by this quote from his compilation of articles titled
General System Theory: Foundations, Development, Applications.
“We may state as characteristic of modern science that this scheme
of isolable units acting in one-way causality has proved to be
insufficient. Hence the appearance, in all fields of science, of
notions like wholeness, holistic, organismic, gestalt, etc., which all
signify that, in the last resort, we must think in terms of systems of
elements in mutual interaction.” (Bertalanffy 1968, p. 45)
What he means is that each element must be looked at individually. Additionally, the
result of the interactions must be explored, as well as the whole that is created as a
result of those interactions.
Bertalanffy built his approach based on the theories of Stafford Beer and Kenneth
Boulding, both management scientists. Born in 1926, Beer was involved in British
operational research and the study of complex social systems. He also was
instrumental in the idea of combining cybernetics with management systems. His first
book, Cybernetics and Management, was published in 1959. Boulding was an
economist who ventured into many disciplines outside of his original area of study. A
spiritual man, his beliefs led him to identify three types of social systems. These
systems are:
exchange systems: activity is organized through the marketing function,
and this system is driven by self-interest;
threat systems: outcomes are based on the threat of loss, and this system
is driven by fear and love; and
integrative, or love systems: there is an integration of utility functions,
which results in the situation of "what you want, I want,” and this system is
also driven by fear and love, where we express our passions and
compassion for others.
These systems, he proposed, were essential for society to thrive.
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The Systems Approach also looks at the interaction between the social aspect of
business and technological changes. In the 1940’s, studies conducted at the Tavistock
Institute of Human Relations in London looked at how technological changes in coalmining
impacted the workers. With the development of new methods to extract coal,
workers’ roles and skills changed. As a result, the workers experienced more stress,
called in sick more often, and found that their social work structure had been altered.
These changes in this sub-system caused a ripple effect that impacted the entire
system. Once technology and the social needs of employees formed a new equilibrium,
productivity was restored.
The Systems Approach, therefore, relies on all components, or sub-systems, to work in
harmony and coordination in order to ensure the success of the larger system.
Contingency Perspective
Founded in the 1960’s, the Contingency Perspective builds upon the Systems Approach
yet recognizes that there are numerous factors that may impact an organization’s
performance. This approach also looks at other theories that claim to be the defining
management approach with skepticism. The claim is that there is no one best way to
manage.
The Contingency Approach recognizes that all business situations are different. Each
event comes with its own set of problems, challenges, and internal and external
environmental factors.
Some of these macro-environmental factors, or contingencies, to be considered include:
changes in technology,
demographic shifts,
economic conditions,
cultural factors, and
government and legislation.
If management is flexible, then management can respond to each of these factors and
act accordingly. Interestingly, studies of companies that operate in uncertain
environments are more successful with a flexible approach to management, while
companies in a more stable environment do better with a more rigid and structured
management style of operations.
In order to determine the most effective management approach, each situation should
be evaluated separately to determine how best to apply any individual management
theory.
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Chaos Theory
Finally, we come to Chaos Theory. Recognized in the 1980’s, Chaos Theory’s premise
is that any system can exist without any specific direction or predictability.
Henri Poincaré was a 19th century French mathematician and early chaos theorist. His
studies can be best described in his quote: “It may happen that small differences in the
initial conditions produce very great ones in the final phenomena. A small error in the
former will produce an enormous error in the latter. Predication becomes impossible.”
(Poincaré 1908) What this illustrates is the unpredictability of events and systems.
Energy is produced but without any specific direction or expectation of results. One of
the most popular examples of this is the leaky faucet, which will drip without a specific
pattern. This is considered chaotic behavior. It is impossible to determine the timing of
the drops, the direction in which they will flow, or the impact each individual drop may
have. Another example is described below with the Butterfly Effect.
Poincaré’s theory went unnoticed until the 1960’s when meteorologist Edward Lorenz
discovered the Butterfly Effect. The foundation of his research was that the flapping of a
butterfly’s wings in one part of the world could have a dramatic impact on the weather
somewhere else. In other words, one small action in one place can greatly impact
conditions elsewhere. Similarly, a small change in a system, while considered minor,
could potentially have a significant effect on the system itself.
In the years that followed, many scientists and theorists explored Chaos Theory and
came to understand that the theory was real and that it could be successfully applied to
organizational management. By recognizing that chaos was part of the normal order of
things, techniques could be employed that would anticipate, and take advantage of,
ensuing chaos.
Businesses can apply the Chaos Theory by allowing groups to form and develop on
their own. Patterns will begin to emerge, enabling management to identify the most
effective ways of shaping the organization. Good managers understand that effective
relationships develop among workers, and those relationships will be in constant states
of change.
Contemporary business writer Tom Peters’ book, Thriving on Chaos: Handbook for a
Management Revolution, illustrates how organizations can thrive by allowing their
employees to function on their own. His ideas reinforce Chaos Theory in our modern
world of management.
Summary:
Early forms of management practices have existed throughout history.
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Industrial growth due to the Industrial Revolution highlighted the need for
new management practices.
The Scientific Approach to management, developed by Frederick Winslow
Taylor, focused on efficiency of movement, stating that a properly
designed job would motivate an employee to be more productive.
The Administrative Approach, developed by Fayol, identified five functions
for conducting all of life’s activities. These functions are: planning,
organizing, commanding, coordinating, and controlling.
The Bureaucratic Approach, proposed by Max Weber, focused on
hierarchical structures and clear designations of authority.
The Human Relations Approach, identified by Elton Mayo, proved that
meeting social needs of workers could enhance the workplace and
positively impact productivity.
The Systems Approach looks at all components of an organization to see
how they interact and to create one larger system.
▪ The Contingency Perspective recognizes that all business situations are
different and can have many internal and external factors that may impact
outcomes.
▪ Chaos Theory states that any system can exist without any specific
direction or predictability. A small change in one situation can have a
significant impact elsewhere in an organization or system.
References:
Bertalanffy, Ludwig von. 1968. General System Theory: Foundations, Development,
Applications.
Poincaré, Henri. 1908. Science and Method.
