BACHELOR OF BUSINESS ADMINISTRATION (YEAR 1) MODULE 1 BUSINESS MANAGEMENT 1A Study Guide

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BACHELOR OF BUSINESS ADMINISTRATION

(YEAR 1)

MODULE 1

BUSINESS MANAGEMENT 1A

Study Guide

MANAGEMENT COLLEGE OF SOUTHERN AFRICA

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MODULE INDEX - BUSINESS MANAGEMENT 1A

Section

Title of Section

Page

1 Introduction to Management 7 – 34

2 Evolution of Management Theory 35 – 64

3 The Management Environment 65 – 94

4 The Management Process 96 – 135

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AIMS OF THIS MODULE

The broad aims of this module are to:

• Introduce the student to fundamental management principles and practices.

• Develop the student’s understanding of the evolution of management theory.

• Develop the student’s understanding of the management environment and its application.

• Develop the student’s understanding of the management process and its application.

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Introduction

This module, Businesss Management, forms an integral part of the MANCOSA qualification and serves to introduce the student to the fundamentals of management. In so doing, the module explores the evolution of management theory, the management environment, the management process, as well as contemporary issues in management.

Contents and Structure

Section 1: Introduction to Management

This first section introduces the student to the concept of management. In this section the nature and definition of management are examined, as are the various levels of management, areas of management and managerial skills. The relationship between management and organizational performance is studied and the scope of and current challenges for management are explored.

Section 2: Evolution of Management Theory

Section 2 explores the evolution of management theory. Here, the importance of theory is established, and various management theories are examined.

Section 3: Management Environment

This third section examines the dynamics of the management environment. In so doing the characteristics of the macro-environment, market environment and micro-environment are studied. The interface between the organisation and the environment is also examined.

Section 4: The Management Process

Section 4 explores the nature of the management process. In this section the four fundamental management functions of Planning, Organising, Leading and Controlling (POLC) are examined. The various areas of management are also studied.

Section 5: Contemporary Management Issues

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How to use the Manual

Don’t try to complete the manual in a few long sessions. You will study more effectively if you divide your study into two-hour sessions.

If you want to take a break it would be a good idea to stop at the end of a section.

As you work through the manual you will come across Activities and Self-Assessment Exercises. These are designed to help you study and prepare for the examinations.

ACTIVITY

Activities ask you to carry out specific tasks. In most cases there are no right or wrong answers to the Activities. The aim of the Activities is to give you an opportunity to apply what you have learned.

SELF CHECK QUESTION

Occasionally you will be required to assess your grasp of concepts by applying concepts to specific situations. Suggested answers to these activities are provided at the end of the specific unit.

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READING

This manual has been designed to be read in conjunction with the following textbook:

Prescribed Reading:

Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th_Edition, Oxford University Press: Southern Africa

SECTION ONE

INTRODUCTION TO MANAGEMENT

CONTENTS

SECTION 1 - INTRODUCTION TO MANAGEMENT

Learning Outcomes Reading 1.1 Introduction 1.2 Nature of Management 1.3 Definition of Management 1.4 Levels of Management

1.5 Management and the Organisation

1.6 ‘Old’ and ‘New’ Organisations

1.7 Management and Organisational Performance

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LEARNING OUTCOMES

The overall outcome for this section is that, on its completion, the student should be able to demonstrate an understanding of fundamental management issues. This overall outcome will be achieved through the student’s mastery of the following specific outcomes, in that the student will be able to:

1. Explain the relationship between the organisation and management.

2. Discuss the management process and explain the relationship between the management process and its environments.

3. Formulate a workable definition of management.

4. Identify the levels of management and critically discuss the activities which are performed at each level.

5. Identify and critically discuss the areas of management, manager role distribution and managerial skills.

6. Identify and critically discuss the concepts of, and key differences between, the ‘old’ organisation and the ‘new’ organisation.

7. Identify and critically discuss the measures of managerial and organisational performance.

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READING

Prescribed Reading:

Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th_{Edition, Oxford} University Press: Southern Africa

• Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts: McGraw Hill. pp 2 – 30.

• Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills. Massachusetts: Allyn & Bacon. pp 1 – 33.

• Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 34 - 63.

• Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co.

Journals

• Hofmeyer, K. (1998) “South African Managers Need To Be More Positive”People Dynamics October, 16(10), pp 16 – 20.

• Mintzberg, (1990) “The Manager’s Job: Folklore and Fact” HarvardBusiness Review , Mar – Apr, pp 163 – 170.

• Moss Kanter, R. (1989) “The New Managerial Work” Harvard BusinessReview Nov - Dec, pp 13 – 20.

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1.1 Introduction

This section, the first section of the BusinessManagement Module, serves to introduce the student to the concept of management. In so doing the following issues are examined:

• Nature of management; • Definition of management; • Levels of management;

• Management and the organisation; • ‘Old’ and ‘new’ organisations;

• Management and organisational performance; and • The scope and challenges of management.

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THINK POINT

The concept of management is inextricably intertwined with the purpose of the business organisation. In your experience….

• why do organisations exist; and

• how does the role of management support the purpose of organisations?

Comment on Think Point

Robbins (1997:38) identifies organisations to be characterized by a distinct purpose, multiple members and a systematic structure. Organisations have emerged and exist primarily because they are more efficient than individuals operating individually and therefore can produce items and/or provide services which an individual could not produce/provide alone. In so doing the organisation is able to meet the needs and demands of current day society through:

• bringing together resources to produce and provide the products and services which the society needs; and

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In order to meet the needs and demands of current day society, organisations establish goals which need to be operationalised for the purpose of the organisation to be achieved (Smit & Cronjé, 2002). Management serves to ensure that such goals are established and operationalised, and in so doing supports the purpose of the organisation.

1.2 The Nature of Management

Management’s task is argued to be “…to examine factors, methods and principles that enable a business organisation to maximise its profits and achieve its objectives, (Cronje:2002:8). The achievement of this task is reliant on the management process, which comprises the functions of planning, organising, leading and controlling, as depicted in Figure 1.1 below.

Figure 1.1: The Nature of Management (adapted from Smit & Cronjé, 2002:9)

THE ENVIRONMENT

MANAGEMENT SCHOOLS OF THOUGHT

RESOURCES • Human • Financial • Physical • Info. PERFORMANCE • Achieve goals • Products • Services • Productivity • Profit CONTROLLING ORGANISING LEADING PLANNING THE ORGANISATION

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A study of Figure 1.1 reveals that the management process requires interaction with a number of variables within different ‘environments’:

• the organisation;

• the macro-environment; and • management schools of thought.

• The Organisation

Within the organisation, management achieves the goals of the enterprise through acting on its human, financial, physical and informational resources by executing the four central management functions of Planning, Organising, Leading and Controlling (abbreviated to POLC). These four functions comprise the core management process:

o Planning involves determining which goals and courses of action the organisation and the various

departments should pursue;

o Organising involves the structuring and arranging of work, resources, departments and the overall

organisation in a manner which will facilitate the achievement of organisational goals;

o Leading involves influencing the organisation’s employees so as to ensure that they are motivated to

perform actions which are aligned with the organisation’s overall goals;

o Control means narrowing the gap between what was planned and the actual achievement of

management, and ensuring that all activities are carried out as they should be. (Du Toit et al, 2013)

The four management functions will be further discussed in Section 4 of this Module Guide. • The Environment

The organisation operates within a market environment, comprising consumers, suppliers and competitors, as well as the macro-environment, which includes the technological, economic, social, political and international environments. These two environments impact on the organisation and therefore affect the nature of the organisation’s management. The organisation’s environment will be discussed further in Section 3 of this Module Guide.

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• Management Schools of Thought

Management Schools of Thought (also known as Management Theories) present frameworks which provide the manager and management student with fundamental principles to guide effective management decisions and actions. Management Theories will be addressed further in Section 2 of this Module Guide.

1.3 Definition of Management

With regards to a definition of management, on the whole, a considerable degree of consensus exists within the literature. Definitions include:

• “…the process of planning, organising, leading and controlling the resources of the organisation to achieve stated organisational goals as productively as possible” ( Cronjé,et al 2004:10).

• “…the process of getting things done through the efforts of other people” (Mondy, Sharplin & Premeaux, 1991: 3).

• “…the process of planning, organizing, leading, and controlling the work of organisation

members and of using all available organisational resources to reach stated organisational goals.” (Jones, George & Hill, 1998:5).

An analysis of the above definitions point to the essential components which should be included in a definition of management:

• Management….

o involves a process in which …

_{the management functions of}_{planning, organising, leading and controlling}_{are executed;} _{organisational resources}_{are utilized; and}

_{work is achieved}_through_{the efforts of other employees,}

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1.4 Levels of Management

Three levels of management within an organisation may be identified: • Top Management

• Middle Management

• Lower / First-Line / Supervisory Management

ACTIVITY

Take note of the top, middle and lower management positions within your organisation. From your experience, what are the distinguishing characteristics of each level of management?

Top Management:

Middle Management:

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Comment on Activity

The three levels of management may be distinguished according to level of responsibility, main functions, time orientation and positions held, as indicated in Table 1.1 below.

TOP MANAGEMENT MIDDLE

MANAGEMENT

LOWER MANAGEMENT RESPONSIBILITY Overall responsibility for

the organisation Responsible for specific departments Responsible for departmental sections / subsections

MAIN FUNCTION Strategic management Implementation of policies, plans & strategies

Application of rules & procedures to achieve high levels of productivity

TIME ORIENTATION Long Term Medium Term Short Term

POSITIONS HELD Board of Directors, Managing Director, CEO, Management Committees Departmental heads, e.g. Marketing Manager, HR Manager Section/subsection heads, e.g. Product, Sales & Promotion Managers within the Marketing Department

Table 1.1: Three Levels of Management

ACTIVITY

From your experience as a lower / middle / top level manager, what percentage of time would you estimate you spend on planning, organising, leading and controlling at your particular management level (lower, middle or top)?

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Comment on Activity

Evidence shows that managers at all levels spend time on all management functions. However, as Daft (1995) points out, the amount of time spent on each particular function differs between each level of management (see Table 1.2 below).

PLANNING ORGANISING LEADING CONTROLLING

TOP MANAGERS 28 % 36 % 22 % 14 % MIDDLE MANAGERS 18 % 33 % 36 % 13 % FIRST-LINE MANAGERS 15 % 24 % 51 % 10 %

Table 1.2: Percentage of Time Spent on Management Functions by Management Level (Daft, 1995: 17).

It is evident from table 1.2 that:

• Top managers spend much time organising, and a substantial amount of time planning; • Middle managers spend time mostly on organising and leading; and

• Lower managers spend just over half of their time leading.

1.5 Management and the Organisation

It has already been identified, in the Introduction (subsection 1.1) to this section, that the relationship between the organisation and management is critical in that management serves to support the establishment of goals, implementation of actions and utilization of resources, so as to enable the achievement of the organisation’s purpose.

This subsection serves to further highlight management’s relation to the organisation by discussing the areas of management, role distribution of managers as well the managerial skills required at various managerial levels.

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1.5.1 Areas of Management

A business also has different types of managers, each responsible for the management of a more or less specialised group of activities. Six functional areas of management may be identified (Cronjé, et al,2004:125):

• Marketing Management • Financial Management • Operations Management • Purchasing Management • Human Resource Management • Public Relations Management

These functional areas of management will be examined further in Section 4 of this Module Guide.

In addition to the six functional areas of management identified above, a seventh area may be identified: that of General Management (Cronjé, 2004). This area of management involves the execution of the four generic management functions of Planning, Organising, Leading and Controlling (POLC), already identified in subsection 1.2, and which are to be discussed further in Section 4 of this Module Guide. General Management is not only performed within each of the six areas of management identified above, but at all levels of management as well.

1.5.2 The Role Distribution of Managers

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READING

Read the following article and then answer the questions which follow:

Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard Business Review , Mar – Apr, pp 163 – 170.

1. How does Mintzberg (1990) view the manager’s job in relation to the organisation?

2. How does Mintzberg’s view differ from the ‘Areas of Management’ approach examined in paragraph 1.5.1 above?

3. From your experience, which approach is more applicable to your position as manager?

Comment on Activity

As identified in paragraph 1.5.1 above, the area of General Management identifies the four management functions of Planning, Organising, Leading and Controlling (POLC) as characterising the manager’s work. However, Mintzberg (1990) argues that not only do these widely accepted management functions provide an inadequate explanation of what managers do, they fail to provide a practical approach to understanding and developing managerial competence as well.

It is argued that the traditional POLC approach oversimplifies the complexity of the manager’s job, which is in effect, “enormously complicated and difficult” (Mintzberg, 1990: 167) and is characterised by brevity, fragmentation and an overburden of tasks. Thus Mintzberg (1990) maintains that it is more useful to view the manager’s relation to the organisation in terms of their roles.

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Figure 1.2: The overlapping roles of managers (Du Toit, et al:2007:137)

Figure 1.2 presents the three categories of managerial roles in a sequential manner. The sequence begins with status emerging from the formal authority vested in the manager’s position. This status allows for the formation of interpersonal relationships and the execution of Interpersonal Roles. The interpersonal relationships in turn provide the manager with access to information and the consequent carrying out of Informational Roles. This information consequently enables the manager’s decision making, and his execution of Decisional Roles.

It needs to be noted that Mintzberg (1990) emphasizes that although he breaks down the manager’s work into ten different roles, his focus is on the gestalt (whole) and he argues that the roles are not separable. In so doing the complex nature of managerial work is acknowledged.

Mintzberg (1990) argues that the managerial role approach contributes to more effective management in that, unlike the traditional POLC approach, it provides managers with insight into the pressures and complexities of their work.

Decision-making role _Entrepreneur _{Troubleshooter} _{Allocator of} resources _negotiator Information role _Monitors _Analyses _spokesman Interpersonal role _{Representative} figure _Leader _relationship

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SELF CHECK QUESTION 1

Discuss the ten manager roles which Mintzberg identifies. Provide an example of each.

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1.5.3 Managerial Skills

In order for the manager to effectively perform in his/her position, certain managerial skills are required.

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THINK POINT

In studying towards this management qualification, what specific management skills are you expecting to acquire?

Why are these particular skills important to the position which you hold (or are to hold) as a manager?

Cronjé et al (2004) identify three categories of skills which managers at all levels of the organisation are identified to possess:

• Conceptual Skills: which refer to the manager’s ability to view the operation of the organisation and its parts holistically.

• Interpersonal Skills: which refer to the manager’s ability to communicate and work effectively with others.

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READING ACTIVITY

Read the section entitled “The Educator’s Job” on page 175 of

• Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard Business Review , Mar – Apr, pp 163 – 170.

SELF CHECK QUESTION 2

What mechanisms exist for the development of managerial skills and how effective are they?

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1.6 ‘Old’ and ‘New’ Organisations

The management environment has been undergoing change which has resulted in change in organisations and managerial work. This has resulted in the emergence of the ‘new’ organisation which provides the flexibility necessary to respond adequately to the changing environment (Robbins, 1997).

ACTIVITY

From your experience, what changes have you observed within organisations and managerial work over the past ten years?

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Comment on Activity

Organisations are changing in a number of ways. Table 1.3 below identifies some of the key changes, as identified by Robbins (1997).

‘OLD’ ORGANISATION ‘NEW’ ORGANISATION

• Permanent jobs

• Control organisation’s own destiny through independence

• Relatively homogenous workforce • 9-to-5 workdays

• Large corporations provide job security • “If it ain’t broke, don’t fix it”

• Work is organized around individuals

• Temporary jobs

• Externalize risk (e.g. through outsourcing)

• Diverse workforce

• Workdays with no time boundaries • Large corporations are cutting overall staff • Reengineer all processes

• Work is organized around teams

Table 1.3: Key Changes Within Organisations (Robbins, 1997: 11)

READING ACTIVITY

Read the following journal article and then answer the question which follows:

• Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review Nov-Dec, pages 13 – 20.

How does Moss Kanter’s ‘post-entrepreneurial’ management differ from the more traditional managerial approach which you have encountered thus far in this section?

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Moss Kanter (1989) argues that as a result of competitive pressures within the management environment, organisations are adopting more flexible strategies and structures. The move to flexibility requires that managers learn to perform new ways of managing, deal with change, implement new ways of motivating people and accept changes in their own bases of power.

Moss Kanter (1989) argues that the post-entrepreneurial organisation presents the traditional manager with the following changes:

o An increased number and variety of channels (horizontal, vertical, cross-functional) exist for exerting

influence and taking action within the new organisation;

o Within the new organisation, relationships of influence are emerging within horizontal peer networks,

and thus are not limited to the vertical chain of command;

o The division between managers and non-managers is blurring, particularly in terms of information

accessibility, access to relationships outside of the organisation and control over assignments;

o External relationships are becoming important in providing for internal power and influence, as well

as career development;

o As a result of the above four factors, stable and predictable paths of career development for

managers are difficult to pre-determine and to guarantee.

The above five factors demonstrate how the post-entrepreneurial manager is distinct from the traditional manager in that his/her managerial power and success is not derived from his/her hierarchical position. Indeed, it is asserted that managers “….must learn to operate without the crutch of hierarchy. Position, title, and authority are no longer adequate tools, not in a world where subordinates are encouraged to think for themselves and where managers have to work synergistically with other departments and even other companies” (Moss Kanter, 1989: 16).

Thus Moss Kanter’s (1989) approach essentially differs from the traditional management approach in that while the traditional approach is grounded in the concept of hierarchy (as shown in subsections 1.4 and 1.5), the post-entrepreneurial approach’s focus is on relationship networks.

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1.7 Management and Organisational Performance

It was indicated in the Introduction (subsection 1.1) that to meet the needs and demands of current day society, organisations establish goals which must be operationalised for the purpose of the organisation to be achieved (Cronjé, 2004). Management serves to ensure that such goals are established and operationalised, and in so doing supports the purpose of the organisation. Thus it follows that organisational performance has a strong relation to managerial performance.

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THINK POINT

What criteria do you think would be appropriate for the measuring of organisational and managerial performance?

The assessment of managerial and organisational performance is one characterized by much debate (Stoner & Freeman, 1992). However, the criteria on which there is much agreement are those of efficiency and effectiveness:

• Efficiency (‘doing things right’) focuses on input and output. An efficient manager is regarded to be one who is able to achieve outputs which measure up to the inputs (time, materials, labour) used to achieve the outputs.

• Effectiveness (‘doing the right thing’) focuses on choosing the most appropriate goals and plans of action (Stoner & Freeman, 1992: 6).

Cronjé (2004) argue that the efficiency-effectiveness approach tends to be simplistic. Rather, the economic principle, where the organisation (and its management) should seek to achieve the highest possible output

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1.8 Scope and Challenges of Management

A number of challenges exist for management not only within the Southern African region, but globally as well.

READING ACTIVITY

Read the following texts and then answer the question which follows:

• Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford University Press: Southern Africa. Chapter 1 and 2

• Hofmeyer, K. (1998) “South African Managers Need To Be More Positive”, People Dynamics, October, 16(10), pp 16 – 20.

• Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition. Cape Town: Juta & Co, pp 23-25. • Taylor, G (2000) “An ‘Empty Beds’ Policy to Manage Aids?” People Dynamics, May, 18 (5), pp 20 – 24.

From your reading of the above three texts, what challenges currently face management within the Southern African region?

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Comment on Activity

Cronjé et al (2007) identify the following challenges to management within the Southern African region: • Management Training for Large and Small Business Organisations: As both large and small

businesses play an important role in the South African economy, one of the challenges is to ensure that organisations of all sizes have skilled management who are able to ensure effective organisational performance. Such management competence should be acquired through appropriate management training.

• International Management: Globalisation has resulted in South African organizations having to compete with global players. The challenge for management exists in improving the performance of South African organisations to achieve sustainable competitive advantage within this highly competitive market (Cronjé, et al 2004).

• Non-profit Seeking Organisations: Non-profit organisations within South Africa, such as the government, place a significant demand on scarce resources. Management’s challenge within these organisations is to ensure efficient and effective use of these resources.

• Managerial and Economic Empowerment: The initiatives of the South African apartheid government resulted in considerable inequalities and consequently a vast number of disadvantaged individuals. The challenge for management therefore is to ensure the managerial and economic empowerment of the previously disadvantaged individuals through, for example, management training and mentorship (Cronjé,et al 2004).

• Cultural Diversity: The South African organisation is characterized by diversity in terms of race, ethnicity, religion, gender and sexual orientation. The challenge therefore is for management to not only appropriately manage, but also harness the potential of a diverse workforce.

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The effective addressing of the management challenges identified by Cronjé et al(2004) and Taylor (2000) may be argued to be dependent on management which is dedicated and enthusiastic. However, research undertaken by Hofmeyer (1998) during 1997 shows that South African management attitudes have become more negative since 1994, particularly in the areas of management relations, productivity, management development and leadership. This thus presents a further challenge: given South African management’s less positive attitudes, is it possible for management to be sufficiently committed and motivated for the challenges identified by Cronjé (2004) and Taylor (2000) to be effectively addressed?

1.9 Summary

This section served to introduce the student to the fundamentals of management. The nature of management was examined and a definition of management was formulated. Further, the levels of management, the areas of management, management roles as well as management skills were examined. The implications which the new organisation has for management were also explored, as were measures of management and organisational performance. This introduction to management was concluded with an examination of the current and future management challenges.

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1.10 Answers to Self-Check Questions

The answers to the Self-Check Questions contained within this section are provided below.

Self-Check Question 1

Discuss the ten managerial roles which Mintzberg identifies. Provide an example of each.

Model Answer

Mintzberg’s (1990) ten managerial roles include: • Interpersonal Roles

o Figurehead Role: the manager is involved in the performance of ceremonial duties, such as

officiating at a long-service award evening.

o Leader Role: the manager works with and through his/her subordinates in order to achieve the

work of his/her department. For example the manager appoints, trains, motivates and promotes his/her subordinates.

o Liaison Role: the manager makes contacts outside of the vertical chain of command to maintain

good relationships within and without the organisation, such as the forming of a sound relationship with a supplier or distributor.

• Information Roles

o Monitor Role: the manager is involved in constantly seeking pertinent information through, for

example, scanning the environment and receiving information from his network of contacts.

o Disseminator Role: the manager passes on information that he has received to individuals within

the organisation who would benefit from it, such as subordinates and colleagues.

o Spokesperson Role: the manager communicates information to people outside the organisation,

for example, the Marketing Director may ensure that the press is kept informed about the organisation’s social responsibility initiatives.

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• Decision-Making Roles

o Entrepreneur Role: the manager seeks to maintain and extend the unit’s/ organisation’s

sustainability through adapting it to changes within the environment.

o For example, the CEO and the management team may decide to change strategy and reengineer

the organisation as a result of influential changes within the organisation’s environment.

o Disturbance Handler Role: the manager is involved in involuntarily responding to pressures and

solving problems. For example, the HR Director may be required to address an unexpected situation within the company which may lead to strike action.

o Resource Allocator Role: the manager decides what quantities of resources such as people,

equipment and money each part of the department / organisation should receive. For example, during the company’s budgeting period, the CEO approves a budget for the Information Technology department which is considerably larger than the other departments’ budgets.

o Negotiator Role: due to his/her authority to allocate resources and his/her access to information,

the manager is involved in negotiations within the company. For example, a supervisor may negotiate changes to job specifications with his/her subordinates.

In closing, it needs to be noted that although Mintzberg (1990) distinguishes ten managerial roles, he argues that all ten of these roles form a integrated whole and cannot be easily separated.

Self-Check Question 2

What mechanisms exist for the development of managerial skills and how effective are they?

Model Answer

Managerial skills may be developed from both education and experience, as depicted in Figure 1.3 on the following page.

Management education, which can take the form of formal or continuous education, provides the manager or potential manager with the opportunity to develop management skills within an educational setting, for example, at colleges, technikons, universities and/or company in-house training facilities (Cronjé, 2004).

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Figure 1.3: Mechanisms for the Development of Management Skills (from Smit & Cronjé, 2002:20)

In contrast to management education, practical experience provides the manager and potential manager with the opportunity to develop management skills while performing his/her job.

With regards to the effectiveness of the two different approaches it is important to note Mintzberg’s (1990) assertion that the development of management competence cannot be achieved from a theoretical approach to education alone. Indeed, it has been recognized that for management development programs to be effective, the cognitive learning which results from education should be married with the practical learning which results from experience.

EDUCATION • Formal Education • Continuous Education EXPERIENCE • Job Experience • Variety of Assignments SUCCESSFUL ACQUISITION & UTILISATION OF MANAGEMENT SKILLS

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SECTION TWO

EVOLUTION OF MANAGEMENT THEORY

CONTENTS

Learning Outcomes

Reading

2.1 Introduction

2.2 Why Study Management Theory?

2.3 Understanding Management Theory

2.4 The Theories of Management

2.4.1 Classical Approach

2.4.2 Behavioural & Human Relations Approach 2.4.3 Quantitative Approach

2.4.4 Contemporary Approach

2.5 Management Theory or Management Fad?

2.6 Summary

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LEARNING OUTCOMES

The overall outcome for this section is that, on its completion, the student should be able to demonstrate a holistic understanding of the evolution of management theory.

This overall outcome will be achieved through the student’s mastery of the following specific outcomes:

1. Discuss the importance and relevance of studying management theory.

2. Discuss the concept of theory and identify the factors which influence the development of management theory.

3. Critically discuss and apply the principles of the Classical Management School of thought.

4. Critically discuss and apply the principles of the Behavioural & Human Relations Management School of Thought.

5. Critically discuss and apply the principles of the Quantitative Management School of thought.

6. Critically discuss and apply the principles of the Contemporary Management School of thought.

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READING

Prescribed Reading:

• Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford University Press: Southern Africa

• Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts: McGraw Hill. pp 32 – 63.

• Micklethwait, J. & Wooldridge, A. (1996) The Witch Doctors. London: Random House.

• Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills. Massachusetts: Allyn & Bacon. pp 61 – 73.

• Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 595 - 610.

• Senge, P.M. (1990) The Fifth Discipline: The Art and Practice of the Learning Organisation. New York: Doubleday.

• Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co

Journals

• Donaldson, L. & Hilmer, F.G. (1998) “The Case Against Fads that Harm Management” Organizational Dynamics Spring, pp 7 – 20.

• Galagan, A. (1991) “The Learning Organization Made Plain” Training & Development October.

• Hammer, M. (1990) “Reengineering Work: Don’t Automate, Obliterate” Harvard Business Review July-August pp104 – 112.

• Nadler, D.A. & Tushman, M.L. (1980) “A Model for Diagnosing Organizational Behaviour” Organizational Dynamics Autumn, pp 35 – 51.

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2.1 Introduction

While Section 1 introduced the student to the fundamentals of management, this section examines the Evolution of Management Theory. Management theory is argued by some to have originated with Nicocolé Michiavelli, while others argue that the Egyptians were the first management thinkers (Micklethwait & Wooldridge, 1996). However, while Michiavelli and the Egyptians may well have been management thinkers, it is only during the last century that management has undergone systematic investigation and has been established as a formal discipline.

This section of the Study Guide examines the body of management knowledge which has emerged since the early 1900s. In so doing, the following will be studied:

• Why study management theory? • Understanding management theory • The theories of management

o Classical Approach

_{Scientific management theory} Administrative management theory

o Behavioural & Human Relations Approach o Quantitative Approach

o Contemporary Approaches

_{Systems theory} _{Contingency theory} Chaos theory

Other contemporary theories

2.2 Why Study Management Theory?

The management student may wonder why the study of management theory is necessary. However, as will be shown, the study of management theory is critical in developing not only a holistic understanding of the discipline, but professional competence as well.

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THINK POINT

Think about your experience in your current organization and/or organizations for which you have worked in the past:

• Identify two managers, with whom you have dealt, who have demonstrated vastly different management styles (for example, an absolute autocrat vs a democratic manager).

• Identify the one manager as ‘Manager A’ and the other manager ‘Manager B’.

• From your experience and observations, what principles do you think underlie Manager A’s view of, and approach to management?

• From your experience and observations, what principles do you think underlie Manager B’s view of, and approach to management?

Each individual manager has a particular view about what management is, and how he/she should approach it. This management framework, which guides the manager in his/her task, is based on a number of principles which the manager has internalized as a result of his/her education and experiences within, and interactions with, organizations and the world itself. In essence, therefore, each individual manager’s actions are guided by his/her own unique, internalized management ‘theory’. It therefore follows that, in exposing the manager or potential manager to the range of management theories which exist, an opportunity will be provided to perhaps challenge and/or extend the manager’s current view of management, and thus enhance his/her professional competence. Indeed, Stoner & Freeman (1992) point out that the study of management theory is important in that the theories serve to:

• Guide management decisions;

• Shape the manager’s view of organizations;

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2.3 Understanding Management Theory

In studying management theory it is important that the management student has an understanding of the concept of ‘theory’, as well as the factors which influence the development of theory.

ACTIVITY

Define the concept ‘theory’.

What factors do you think influence the development of a theory?

Comment on Activity

Definition of Theory

Stoner & Freeman (1992) define a ‘theory’ as a “coherent group of assumptions put forth to explain the relationship between two or more observable facts and to provide a sound basis for predicting future events”. Another definition of the word ‘theory’ is “a supposition or system of ideas explaining something” (Thompson, 1995: 1446). In essence, therefore, a theory is a framework of principles.

From the management perspective, it may be argued that each management theory provides a framework of principles which serve to guide not only the manager’s understanding of management issues, but his/her management-related actions as well.

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Factors Influencing the Development of Theory

It needs to be noted that management theories do not develop in a vacuum but develop within, and as a result of, the dynamic environment. The environmental forces which impact on the development of management theory are depicted in Figure 2.1 below:

Figure 2.1: Environmental forces that shape management thought (from Smit & Cronjé, 2002: 37)

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THINK POINT

Examine Figure 2.2 (under sub-section 2.4) which provides an indication of the periods during which the various schools of management emerged. Are you aware of any of the environmental forces which were influential during the periods in which these management schools of thought emerged?

ECONOMIC POLITICAL SOCIAL ECOLOGICAL INTERNATION AL EVOLUTION OF MANAGEMENT

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A study of the evolution of management schools of thought reveals that theories tended to emerge in tandem with, or just after, notable environmental changes:

• The Classical Management School emerged during the early 1900s and was influenced by the economic, technical and cultural changes which were brought about as a result of the industrial revolution and the introduction of steam power (Cronjé, et al 2004); Jones, George & Hill, 1998)

• The Behavioural Management School emerged during the 1920s and 1930s and was influenced by the Great Depression and decline in prosperity (Cronjé,et al 2004) as well as failure of the Classical Management School to provide for workplace harmony (Stoner & Freeman, 1992).

• The Quantitative Management Approach emerged during the 1940s and was influenced by World War II during which both the British and the Americans utilized mathematical

approaches and technology to solving war-related problems (Cronjé,et al 2004).

• The Contemporary Management Theories began to emerge during the 1950s and were influenced by the rapid and ongoing change which characterised the business environment after World War II (Cronjé,et al 2004)

In summary, this sub-section has provided the management student with an understanding of the nature of theory, as well as the environmental factors impacting on the development of management theory.

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2.4 Theories of Management

The schools of management which will be studied in this subsection include: • Classical Approach

• Behavioural & Human Relations Approach • Quantitative Approach

• Contemporary Approach

These schools emerged in a chronological sequence, which is depicted in Figure 2.2 below.

Figure 2.2: Key Management Theories (adapted from Freeman & Stoner, 1992: 29)

It must be noted however, that although the schools developed chronologically, later management theories did not (and do not) serve to replace the earlier theories. Rather, each new theory which emerges tends to complement or exist alongside those theories which have been established for some time.

1900 1950 2000

CLASSICAL SCHOOL

BEHAVIOURAL SCHOOL

QUANTITATIVE SCHOOL

CONTEMPORARY SCHOOL

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2.4.1 The Classical Approach

The two major theories which comprise the Classical Management Approach are Scientific Management Theory and Administrative Management Theory.

Figure 2.3: The Classical Management School

The emergence of the Classical Approach was influenced by the steam-engine which was a product of the Industrial Revolution. Steam power provided for efficient production which in turn led to a shift from farm work to factory work where the principle of mass production was upheld. This shift from the agrarian mode to the factory system brought about a number of organisational problems, such as poor motivation of workers (Cronjé,et,al 2004). The classical theories emerged to address these problems.

CLASSICAL MANAGEMENT SCHOOL SCIENTIFIC MANAGEMENT THEORY ADMINISTRATIVE MANAGEMENT THEORY

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READING ACTIVITY

Read the following texts and then answer the questions which follow:

• Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford University Press: Southern Africa.

• Cronjé,. (2004) Introduction to Management Principles ;6th Edition Cape Town: Juta & Co. pp 132-138

• Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co

• Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts: McGraw Hill. pp 36 – 47

1. Identify the key characteristics of Scientific Management Theory.

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Scientific Management Theory

Scientific Management Theory arose partly due to the need to increase productivity. Fredrick Taylor, Henry Gantt and Frank and Lillian Gilbreth are best known for their contributions to the field of Scientific Management.

• Frederick Taylor was a manufacturing manager (originally a mechanical engineer) who

sought to increase the productivity of the individual worker through increasing specialization and job division of labour. He developed four principles to increase efficiency in the work place:

o Examine the way in which workers perform their tasks and experiment with ways of improving the

way in which the task is performed;

o Record the new methods of performing the task as rules and standard operating procedures; o Ensure that workers’ skills and abilities match the needs of the task, and train them to perform the

task according to the written rules and standard operating procedures;

o Determine an acceptable level of performance for each task and develop a remuneration system

which rewards performance which exceeds the acceptable level (Cronjé, et al, 2004).

• Frank & Lillian Gilbreth built on the work of Taylor and focused on work simplification.

Their approach included:

o Analysing each individual action required to perform a task; o Identifying better ways of performing each action;

o Increasing the efficient performance of the whole task through reorganizing the individual actions

(Jones, et al, 1998).

• Henry Gantt redesigned the incentive system developed by Taylor by providing not only for the payment of a bonus to the worker who exceeded the daily standard, but to the worker’s supervisor as well. He also devised a chart for production scheduling, the Gantt Chart, which is still in use today (Stoner & Freeman, 1992).

The Scientific Management Approach succeeded in its endeavour to increase productivity. However the approach, in focusing on work and productivity, neglected to address the ‘human’ element, which ultimately

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Administrative Management Theory

While Scientific Management Theory focused on the productivity of the worker, Administrative Management Theory essentially focused on how to increase productivity at the level of the organization. Henri Fayol and Max Weber made significant contributions to this view of management.

• Henri Fayol, recognised as Europe’s greatest management pioneer, adopted a process approach to management. He identified 14 principles which he argued could increase the efficiency of the management process. Many of these principles (e.g. division of labour, authority and responsibility, unity of command, unity of direction, team spirit) form the basis of management and research today (Jones, et al, 1998).

Fayol also identified five basic functions of administration:

o Planning o Organising o Commanding o Coordinating o Controlling

Having achieved the outcomes of Section 1 (Introduction to Management) of this Study Guide the student of management should recognize that Fayol’s five basic functions correspond to the four contemporary management functions of Planning, Organising, Leading and Controlling.

• Max Weber: developed a theory of bureaucratic management and emphasized the need for a hierarchy governed by lines of authority (Cronjé,et, al 2004).

Administrative Management Theory has made a significant contribution to the field of management in that a considerable number of its principles are still being used in management research and applied in management practice today. A criticism of this theory however, is that it is more applicable for the stable

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2.4.2 The Behavioural & Human Relations Approach

While the focus of the Classical Management Approach was either the productivity of the worker or the productivity of the organization, the Behavioural & Human Relations Approach focuses on the needs of the worker. Indeed, the Behavioural & Human Relations Approach emerged in part in reaction to the ‘inhumane’ view of the Classical Approach. Mary Parker Follett, Elton Mayo and Douglas McGregor are recognized as having made significant contributions to the Behavioural & Human Relations Approach.

• Mary Parker Follett: much of Follett’s writing emerged in reaction to Taylor’s scientific approach. Indeed, Follett argued that it is the worker who knows most about his/her job and therefore the worker should be involved in the job analysis and work development process. She also anticipated the current management interest not only in self-managed teams and empowerment, but in horizontal (as opposed to Fayol’s and Weber’s vertical) power and authority (Jones, et al, 1998).

• Elton Mayo: An experiment, which investigated the relationship between the level of lighting in the workplace and workplace productivity, at the Hawthorne Works at the Western Electric Company near Chicago during 1924 – 1933, showed that productivity improved not only when lighting was improved, but when lighting conditions were made worse as well (Jones, et al, 1998). Elton Mayo, a Harvard psychologist, was called in to investigate this phenomenon. It was argued that management’s interest in, and concern for, the workers’ well-being had served to enhance worker performance. This phenomenon has come to be known as the Hawthorne Effect.

The findings of the Hawthorne experiment precipitated an interest in research in the area of managerial behaviour and leadership, and thus emerged the Human Relations Movement (Jones, et al, 1998).

• Douglas McGregor: McGregor argued that two different sets of assumptions determine how manager’s view their subordinates and manage their departments. He argued that Theory Xmanagers assume that employees are inherently lazy and therefore they need to be closely supervised and controlled. On the other hand, Theory Y managers adopt a positive view of employees and believe that it is the manager’s task to create a climate in which employees can effectively perform their work (Cronjé, et,al 2004).

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The Behavioural & Human Relations Approach has contributed to the field of management in that it has stressed the employee’s social needs, which in turn has led to a focus on the development of people-management skills, as opposed to technical skills alone. Further, it has provided insights into issues such as individual motivation, group behaviour and interpersonal relationships at work (Stoner & Freeman, 1992). A limitation of the Behavioural & Human Relations Approach lies in the fact that human behaviour is complex in nature, which presents challenges to its study.

ACTIVITY

Consider the organization for which you currently work. What particular organizational and managerial practices show evidence of a Behavioural & Human Relations Approach?

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Comment on Activity

Organizational and managerial practices which exhibit a Behaviour & Human Relations Approach could, for example, include:

• Allowing for self-direction in employee work; • Participative decision making;

• Self-managed work-teams;

• Knowledge sharing at, and between, all levels; • Training and development initiatives for employees.

2.4.3 Quantitative Approach

The Quantitative Approach, also referred to as the Management Science Approach, is essentially an extension of Taylor’s Scientific Management Theory (Jones, et al, 1998). It focuses on the use of rigorous quantitative techniques which enable managers to achieve productivity through the most effective and efficient use of organizational resources to produce goods or services. The Quantitative School includes the following approaches, all of which provide the manager with tools and techniques to increase the effectiveness of his/her decision making:

• Quantitative management (employs mathematical techniques such as linear programming, modeling, simulation & queueing theory);

• Operations management;

• Total Quality Management (TQM); and

• Management information systems (MIS) (Jones, et al, 1998).

2.4.4 Contemporary Approaches

A considerable number of contemporary management theories exist. The following contemporary theories will be studied in this sub-section:

• Systems Theory • Contingency Theory • Chaos Theory

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2.4.4.1 Systems Theory

The Classical Approach, The Behavioural & Human Relations Approach and the Quantitative Approach have two major short-comings which Systems Theory (also known as Organizational-Environment Theory) seeks to address:

• The influence of the environment is not considered; and

• One part or aspect of the organization is focused on the neglect of all other parts and/or aspects (Cronjé, et, al 2004).

Systems theory views the organisation as a purposeful and unified system which is composed of interrelated elements. The principle of synergy applies in that the whole is regarded to be greater than the sum of its parts (Stoner & Freeman, 1992).

READING ACTIVITY

Read the following article and then answer the questions which follow:

• Nadler, D.A. & Tushman, M.L. (1980) “A Model for Diagnosing Organizational Behaviour” Organizational Dynamics Autumn, pp 35 – 51.

1. What characteristics of a system do Nadler & Tushman (1980) identify?

2. What do you understand by Nadler & Tushman’s (1980) concept of “congruence”?

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Nadler & Tushman (1980) present a general model of the organisation which “provides a framework for thinking about the organisation as a total system….the models major premise is that for organizations to be effective, their subparts or components must be consistently structured and managed – they must approach a state of congruence.” (Nadler & Tushman, 1980: 37).

Characteristics of a System

A system is defined to be a set of interrelated components. An open system is one which interacts with its environment, and in so doing becomes part of a greater system. Basic system characteristics include: • Internal interdependence: where changes in one of the system’s components will result in

changes or repercussions in the system’s other components (Nadler & Tushman, 1980).

• Capacity for feedback: information about the output can be used by the organization to address problems. However, organizations do not always use the information available.

• Equilibrium: the system seeks homeostasis, i.e. if an event leaves the system in a state of imbalance, it will react in such a way so as to regain equilibrium.

• Equifinality: the system can achieve its outputs through a number of different ways or system configurations (Nadler & Tushman, 1980).

• Adaptation: a systems survival depends on it maintaining a state of balance within the greater system in which it operates, i.e. the environment.

The Concept of Congruence

Nadler & Tushman’s (1980) concept of congruence refers to achieving an appropriate balance between the parts of the organisation (system), i.e. achieving a good ‘fit’ between the entire organisation’s components.

Congruence Model of Organisational Behaviour

Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour is depicted in Figure 2.4 on the following page.

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Figure 2.4:Congruence Model of Organisational Behaviour (from Nadler & Tushman, 1980: 47)

Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour views the organisation as a system which takes inputs from the environments and transforms them within its system to produce outputs. The system (or organisation) is identified to consist of four main components, namely, the informal organisation, task, individual and formal organisation. The effectiveness of the organisation’s performance is dependent on the achievement of congruence between all four components.

FEEDBACK Strategy INPUTS Environment Resources History TRANSFORMATION PROCESS INFORMAL ORGANISATION FORMAL ORGNISATION INDIVIDUAL TASK OUTPUTS Organisation Group Individual

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2.4.4.2 Contingency Theory

Systems Theory provides for a Contingency Approach (also known as a Situational Approach) to management.

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THINK POINT

Consider the organization where you are currently employed. To what extent are the following approaches evident in the organizational and management practices within your organization?

• the Classical Approach

• the Behavioural & Human Relations Approach • the Quantitative Approach

• the Systems Approach

It is likely that the student of management is able to identify practices within his/her organisation which demonstrate elements of all four approaches to management. Indeed, given the complexity of today’s management environment, it would be unwise for the manager to adhere to one particular school and neglect the others. Rather, given the dynamic environment in which organisations operate, it is the manager’s task to tailor his/her management approach to the particular situation – and this would require

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2.4.4.3 Chaos Theory

For decades, managers have acted from the premise that organizational events can be controlled. However, Chaos Theory, is based on the premise that very rarely can events be controlled, and thus acknowledges the dynamic nature of the contemporary management environment.

READING ACTIVITY

Read the following article and then answer the questions which follow.

• Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos” Organizational Dynamics Spring pp 21 – 32.

1. Why is Chaos Theory appropriate to the present day organisation?

2. What are the key characteristics of Chaos Theory?

3. How could management go about transforming the organisation for which you work into a chaordic Organization

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Chaos Theory argues that “relationships in complex systems, like organizations, are nonlinear, made up of interconnections and branching choices that produce unintended consequences and render the universe unpredictable (Tetenbaum, 1998: 21).

Chaos Theory & the Present Day Organisation

Tetenbaum (1998) argues that the industrial era of the past is fundamentally different to the information age of the present. During the industrial age the environment was relatively stable and organizational work was routine. In contrast, however, Tetenbaum (1998) identifies the information age to be characterized by the following:

• Technology which increases production, efficiency and consumer power; • Globalization;

• Competition which, as a result of technology and globalisation, has become more fierce; • Change, the pace of which is considerable;

• Speed;

• Complexity & Paradox which has emerged as a result of the above 5 factors and presents the manager with the challenge of conflicting choices and conditions (Tetenbaum, 1998).

Key Characteristics of Chaos Theory

Chaos Theory focuses on the “web of feedback loops present in every system” (Tetenbaum, 1998: 24). While feedback loops are linear in certain systems, they are non-linear in systems characterised by complexity, such as the business organisation.

The characteristics of Chaos Theory include:

• Chaos as Order:Tetenbaum (1998: 24) asserts that “chaos describes a complex

unpredictable, and orderly disorder in which patterns of behaviour unfold in irregular but similar forms” . An example of such orderly disorder is the regular irregularity of a snowflake.

• Chaos as a Self-Organizing Entity: Chaos Theory views systems to be self-organizing in that they are self-adaptive and complex (Tetenbaum, 1998) Thus structure evolves and change emerges (this differs from the Classical Approach where structure is imposed). An example of an organisation which

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10,000% since 1970, consists of 20,000 financial institutions and operates in more than 200 countries. However, despite its size and growth one does not know where it is located due to the fact that it is decentralized, non-hierarchical and evolving (Tetenbaum, 1998).

Building a Chaordic Organisation

Tetenbaum (1998) identifies the following characteristics of a chaordic organisation (i.e. an organisation which embraces the chaordic paradigm):

• Knowledge and information sharing; • Innovation and creativity;

• Teamwork and project orientation; • Diversity; and

• Strong core values

The role of management in facilitating the move to the chaordic organisation is to: • Manage the transition;

• Build resilience to change; • Destabilize the system;

• Manage complexity and paradox, i.e. order and disorder, the present and the future; • Create and maintain a learning organisation (Tetenbaum, 1998).

2.4.4.4 Other Contemporary Theories

Cronjé (2004) identify three further contemporary management theories: • Total Quality Management (TQM)

• The Learning Organisation • Re-engineering

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• Total Quality Management (TQM) focuses the business on the achievement of quality through the prevention of mistakes. The central principles of TQM, which have emerged from the work of Deming, include:

o Strong emphasis on the customer; o Focus on continual improvement;

o Quality improvement in all that the organisation does; o Accurate measurement;

o Employee empowerment ( Cronjé, 2002).

• The Learning Organisation approach, advocated by Peter Senge, is based on the Systems

Theory and argues that organisations should overcome their learning disabilities through:

o Commitment to lifelong learning;

o Challenging assumptions and generalizations; o Sharing the organisation’s vision;

o Promoting active dialogue within the organisation; o Encouraging systems thinking (Cronjé,et,al 2004).

• Re-engineering, is an approach put forth by Hammer & Champy, and involves the redesign

(re-engineering) of organizational processes so as to “create and sustain value for customers while managing costs” (Cronjé,et al, 2004:137).

This subsection has explored various management theories. The theories which fall within the Classical School, the Behavioural & Human Relations School, the Quantitative School and Contemporary School have been examined.

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SELF CHECK QUESTION 1

Read the following case study adapted from Stoner & Freeman (1992: 52) and then answer the question which follows.

Consolidated Automobile Manufacturers Inc.

On Tuesday morning at 6 am, two young automobile assembly-line workers, disgruntled after failing to get their supervisor transferred, shut off the electric power supply to an auto-assembly line and closed it down at Consolidated Automobile Manufacturers, Inc.

The electric power supply area, containing transforme