The Management Movement

Business ManagementChapter 2

Standards

• After this lesson you will be able to…– Explain how the U.S. economy changed during the

nineteenth and early twentieth century.– Identify various theories of management.– Explain the effects of Japanese business practices

on management in the United States.

EVOLUTION OF MANAGEMENT

The Industrial Revolution

• Some forms of management have existed since the beginning of time.

• Ever since one human tried to direct another, ideas about management have been developing.

• Industrial Revolution– Period during which a country develops an

industrial economy. 1860.

Management History

• The new industrial enterprises that emerged in the nineteenth century demanded management skills that had not been necessary earlier.

In your Journal…

• Why was professional management less important when the U.S. economy was based on agriculture?

• Think about it and write it down (Think)

• Turn to your partner and discus (Pair)

• Be prepared to share with the class (Share)

Causes of the Industrial Revolution

• Changes in technology, communication, and transportation made the Industrial Revolution possible.

• Advances in manufacturing processes allowed new products, such as steel, to be created.

• The growing use of steam power permitted more and more factories to operate.

• Telegraph and cable lines in the United States were extended across the country after the Civil War, linking the country from coast to coast.

Causes (continued)

• Advances in transportation also improved opportunities for industry.– 52,900 miles of railroad– Easier for businesses to send and receive products

and supplies.

Captains of Industry

• Powerful businesspeople who created enormous business empires dominated and shaped the U.S. economy.– John D. Rockefeller (oil)– James B. Duke (tobacco)– Andrew Carnegie (steel)– J.P. Morgan (banking)– Cornelius Vanderbilt (steamships and railroads)

Creation of Monopolies

• The captains of industry of the 19th century often pursued profit and self-interest above all else in order to create huge enterprises.

• They drove competitors out of business and created giant companies than maintained monopolies in their industries.

• A monopoly occurs when one party maintains total control over a type of industry.

In your Journal…

• Why are monopolies bad for the economy?

• Think about it and write it down (Think)

• Turn to your partner and discus (Pair)

• Be prepared to share with the class (Share)

• Rockefeller lowered the prices he charged for oil in order to force his competitors to sell out of join forces with him.

• He combined the dozens of companies he owned into a single trust, or giant industrial monopoly.– He controlled more than 90% of the country’s

refining capacity.

The Break-Up of the Trusts

• By 1870, many people became worried about the concentration of wealth in the hands of a few very rich business owners.

• Questioned the ways in which these businesses drove their competitors out of business.

• Government decided to begin regulating business.

Interstate Commerce Act

• 1887 Congress passed.• Forced railroads to publish their rates and

forbade them to changes rates without notifying the public.

The Sherman Act

• 1890 Antitrust Act• Made it illegal for companies to create

monopolies.• Law was intended to restore competition at a

time when monopolies had taken over many industries.

• Government broke up many of the large trusts.

• Allowed for competition.

In your Journal…

• Why is competition in business important for business managers?

• Think about it and write it down (Think)

• Turn to your partner and discus (Pair)

• Be prepared to share with the class (Share)

New Challenges for Management

• Frederick W. Taylor and Scientific Management– Need for ideas about productivity and motivation.– He noticed workers did not work as hard as they

could.– Tried to figure out “one best way” to perform a

particular task.– Used a stopwatch to determine which work

method was the most efficient. (time and motion studies)

• Scientific management seeks to increase productivity and make work easier by carefully studying work procedures and determining the best methods for performing particular tasks.– Jobs should be designed according to scientific rules rather

than rule of thumb methods.– Employees should be selected and trained according to

scientific methods. Employers should study worker strengths and weaknesses.

– Employers should train employees in order to improve their performance.

– Management and workers should be interdependent so that they cooperate.

In your Journal…

• What parts of scientific management do you agree with? Disagree with? Why?

• Think about it and write it down (Think)

• Turn to your partner and discus (Pair)

• Be prepared to share with the class (Share)

Hawthorne Studies of Productivity• Looked at the relationship between working conditions and

productivity.• Examine variables to see what effect they have on productivity.• Tested different wage payments, rest periods, work hours, and

other variables. Productivity always increased!– Workers worked harder when they received attention.– Change of any kind increases productivity = “The Hawthorne Effect.”

• Other factors psychological and social conditions at work effected productivity.– Informal group pressures– Individual recognition– Participation in decision making– Effective supervision significantly affected both productivity

and employee morale.

Abraham Maslow Hierarchy of Needs

• People have 5 basic types of needs.– Physical needs

• Food, water, air, and sleep– Security needs

• Freedom from physical, psychological, or financial harm– Social needs

• Need to talk to others, express feelings of friendship, accept and be accepted by others.

– Status needs• Self-esteem and the esteem in which one is held by others

– Self-fulfillment• Need to realize one’s own potential

Hierarchy of Needs (continued)

• Individuals fulfill lower level needs before seeking to fulfill higher level needs.

• People satisfy their need for food before they seek self-fulfillment.

• Hierarchy of Needs is Maslow’s grouping and ordering of physical, security, social, status, and self-fulfillment needs.

Applying Maslow’s Theory to Management

• At the lowest level workers are motivated by basic needs, such as the need for wages or salary. Basic needs also include the physical conditions in which a person works– Heating, lighting, and noise level.

• Once those are met employers address safety or security needs.– Provide workers with insurance, retirement

benefits, and job security.

continued

• Social needs are met by providing work environments in which colleagues interact.– Company lunch rooms, company retreats, etc.

• Status needs are met by providing workers with signs of recognition that are visible to others.– Job titles, private offices, designated parking spaces,

awards, and promotions.

• Self-fulfillment is met by allowing workers to be creative at work.

In your Journal…

• What do you think you as a manager at a coffee shop can do to meet the needs of your employees?

• Think about it and write it down (Think)

• Turn to your partner and discus (Pair)

• Be prepared to share with the class (Share)

THE DEVELOPMENT OF MODERN

MANAGEMENT

Empowering Employees

• As organizations grew in size and complexity, new styles and methods of management began to emerge.

• Different philosophies developed on how best to manage people.

• Theory X and Theory Y• Centralization versus Decentralization

Theory X and Theory Y

Theory X• Assumes that people are

basically lazy and will avoid working if they can.

• To make sure that employees work, managers impose strict rules to make sure that all important decisions are made only by them.

• “Management knew all the answers”

Theory Y• Assumes that people find

satisfaction in their work.• Believe that people will

work productively if put in the right environment.

• People are creative and will come up with good ideas if encouraged to do so.

• “In this company, you’ll be fired for not making mistakes.

Theory X• Most people HATE work• Most people want to AVOID RESPONSIBILITY• Most people have LITTLE AMBITION for themselves• Most people prefer to BE LED• Most people have little ability to SOLVE PROBLEMS• Most people require close CONTROL to prevent mistakes• TWO GROUPS of people; there are “them”, who needs to

be watched, controlled, told what to do, who do not like to work. But then there is us, we, the lucky few, the leaders who are going to make sure the organization functions, we are the do’ers that makes the dream happen.

Theory Y

• Work can be ENJOYABLE as play• Most people want to accept reasonable levels of

RESPONSIBILITY• Most people have strong GOALS for themselves, and

seek organizations that will help to fulfil those goals• Most people like to LEAD occasionally• Most people are good PROBLEM SOLVERS• Most people require NO POLICING or close control by

the organization• Most people can be AUTONOMOUS and independent

Centralization vs. Decentralization

Centralization• Refers to the concentration

of power among a few key decision makers.

• Henry Ford almost destroyed the company he built because the refused to let his managers perform management tasks.

• Fear losing control.

Decentralization• Process by which decisions

are made by managers at various levels within an organization.

• Managers make important decisions.

The Emphasis on Quality and Teamwork

• Total Quality Management (TQM) is a system of management based on involving all employees in a constant process of improving quality and productivity by improving how they work.

• American businesses– Focuses on totally satisfying both customers and

employees

TQM Standards

1. Improve products to remain competitive.2. Adopt a new philosophy.3. Stop depending upon mass inspection. Rely on

statistical evidence.4. Consider quality as well as price in awarding business.5. Constantly improve the system of production.6. Institute vigorous program of job training.7. Adopt and implement leadership.8. Drive out fear so that everyone may work effectively

for the company.

TQM Standards

9. Break down barriers between departments.10. Eliminate numerical goals, posters, and slogans.11. Eliminate work standards that prescribe numerical

quotas.12. Remove barriers that stand between the hourly

worker and his or her right to pride of workmanship.13. Encourage education and self improvement for

everyone.14. Create a structure in top management that will work

every day to achieve the above 13 points.

Total Quality Management

• Consumers must be happy with the price and quality of what a business produces.

• What are some of the things managers do to assure the quality of their products or services?

Applying Total Quality Management

• Hourly workers and management work together. It’s not us against them.

• Motorola– Employees carry wallet-sized cards that state “Our

Fundamental Objective (Everyone’s Overriding Responsibility): Total Customer Satisfaction.”

• General Electric– Executives’ bonuses depend on how well the company

improves quality.• Burger King– No employee receives a bonus if the company fails to

meet its quality goods.

Japanese Management Practices

• Collective decision making.• Decision making by teams.• Collective responsibility.• Slow evaluation and promotion.• Understood control mechanisms.

Theory Z

• A business management theory that integrates Japanese and American business practices.

• Long term employment.• Participative decision making.• Individual responsibility.• Slow evaluation and promotion.• Moderately specialized career path.