Management Theory – No Simple Solutions

The problem with any management theory is that there is no one correct answer. There is no all-purpose philosophy that will suddenly transform a failing business into a successful one. But that doesn’t stop managers being taken in.

Shareholder Value is one such management theory that developed into a cult. Numerous companies were enticed into the notion that managers must take care of investor interests via dynamic policies to drive up the share price ad infinitum.

Shareholder Value lasted longer than almost any other fad. In fact, it still lingers, in spite of shocking crashes in shares which decimated shareholder value. But the Cult of Shareholder Value transformed into the Cult of CEO Value, focusing managements on the sole key variable out of their control – the share price. It prevented them from focusing on the metrics (not always financial) that tell cold, hard truths about a business. Shareholder Value fooled chief executives into believing that the wealthier they became personally, the better for the shareholders. These mortals soon believed themselves to be Gods of Management.

This was a stark contrast to the 1980s, when Western management looked East to successes in Japan, where short-term considerations were ignored in pursuit of productivity, growth and long-term market penetration. As a result, the managers of the West took on board the Eastern management theory of continuous improvement.

Many companies went as far as taking the plunge into Total Quality Management, which faded but reappeared in the form of Six Sigma, with the undeniable basic principle that planned and trained bottom-up methodology can improve all operations.

However, success in Six Sigma will do little to help a company that is pursuing the wrong strategy in the first place. Management has many sides and one theory rarely applies to all.

Most managers have experience of an organization achieving less than the sum of its parts: opportunities not seized and information lost because of systematic bottlenecks and over-rigid control, talent wasted and mistakes ignored until it is too late.

However, the biggest mistake is to consider those kinds of problems inevitable and incurable. Systematic defects tend to respond well when the underlying illness is treated rather than just the symptoms. The managers most qualified to do this are those who know that optimization is the objective and that nothing lasts for ever so reform and renewal must be repeated and a combination of old and new tricks are necessary rather than one, all-conquering management theory.

This old-new combination is at the heart of fusion management, seeking to marry the entrepreneurial dynamism of Western minds with the patient philosophy of the East. Good managers concern themselves with big ambitions rather than the latest Big Idea.

Old Management Theory and Employee Motivation

The development of management theory exists on a continuum where each new insight leads to either an updated theory or a new theory. Yet as society changes we often falsely assume that older theory has no bearing in modern life. We seem to forget that these theories are based in basic human needs that don’t change. What does change is the expression of those needs and how we go about fulfilling them.

Reviewing old management theory is important because these older theories often are simpler and cut to the problem more quickly. They don’t jumble up all the relevant information with educated ramblings. They prefer to get to the root of the matter so that great understanding can happen. The more understanding we have the better ability we have to achieve our business goals.

Let us take Adam Smith as one example. Adam Smith, around 1776, observed that human beings tended to conserve energy and in so conserving energy they had to have a challenge or motivating force. In his work entitled An Inquiry into the Nature and Causes of the Wealth of Nations he wrote, “In every profession, the exertion of the greater part of those who exercise it is always in proportion to the necessity they are under in making the exertion.”

What does that mean? It means that we don’t like to exert energy fulfilling a need. However, we will exert energy based on the necessity of fulfilling a need. For example, if we really want something bad enough we will be willing to exert enough energy to achieve it. Have you ever met someone who was motivated in life? It is probably from a need to be recognized and appreciated.

As this need becomes stronger we are more likely to exert additional energy. Let us say that you were a tribesman from some African village. If you aren’t that hungry you probably won’t work that hard. Yet as you get closer to starvation you will exert more energy hunting, fishing, and getting more food. The same principals can be applied to housing (big houses), money, dating and more.

Nearly a hundred years later Henry George, around 1898, states this disposition of men to seek the satisfaction of their desires with the minimum of exertion is so universal and unfailing that it constitutes one of those invariable sequences that we denominate the laws of nature.”

George is proposing a law of nature that energy exertion is dependent upon the intensity of the need or desire. Apply this concept to your business. Employees aren’t likely to work very hard if the majority of their needs are fulfilled. For example, if they don’t have drive to achieve more than an average employee they aren’t likely to work that hard. Some employees have no desire to achieve (need) and are not going to work hard to maintain the status quo. Recruit people who want to succeed in life and you will get more work out of them.

Management Theories – Flavour Of The Month?

Managers face plenty of difficult choices when it comes to management theories. Do they put their trust in Total Quality Management? Or how about Business Process Reengineering? Perhaps they should aim to make their business a Learning Organization, or concern themselves with the continuous improvement of kaizen?

Top bosses are forever latching on to these management theories and attempting to instill them in their companies. But too often, the concepts turn out to be merely the ‘flavour of the month’. Managers introduce a new initiative with a fancy name, give the employees some training and after the benefits are deemed to be negligible, another ‘programme’ fades away.

Managers are always looking for a panacea. A prime example was Management by Objectives, or MBO. The foundation for this was a powerful insight from Peter Drucker: managers’ performance is better if they know what’s expected of them and have agreed to it. So MBO put forward a raft of aims, all with numbers attached, to guarantee corporate success and perfect performance. This was the theory, at least. In practice, it didn’t deliver and MBO faded away.

The philosophy of Policy Deployment in advanced Total Quality Management is at first similar to MBO. It has been described by the PA Consulting Group as ‘a fully integrated top-down, bottom-up management system through which the two or three critical breakthrough targets and means are identified and implemented with the full participation and alignment of all managers’.

However, PD allows people to both share in drawing up the objectives and also to set out what improvements they plan. While MBO set targets, it wasn’t too concerned with how those targets were met. PD, on the other hand, is deeply concerned with process and doesn’t make the mistake of MBO in believing that the perfect system will give you the perfect results. The theorists behind PD know that panaceas don’t exist and that errors will occur that will require correction.

But management theories are certain to fail if they are expected to achieve wonders overnight. Many years of sustained effort are required. And failure is guaranteed if the top management refuse to join in. Anyone who refuses to participate will harm the collective performance of the company and the system.

The word ‘system’ is important. Many of the management theories mentioned here can produce lasting improvement in aspects of performance. However, those improvements have to be integrated with all the other processes in the system – and that doesn’t mean the ‘company’ or ‘unit’. It goes beyond those boundaries and has customers and suppliers at either end.

Management Theory – A Brief History

The work of management theorists over the last hundred and fifty years can be used to argue the case for an in depth theoretical, as well as practical knowledge of many management styles, including the positive and negative attributes of each. It is also important to examine the ‘structure’ of different organisations to consider how it affects, and is affected by the management style of that organisation. Organisational Structure is essentially concerned with the allocation of authority and power. Managers need to make decisions and need to have the authority to do so. A ‘hierarchical organisation’ will have the greatest power at the top of the organisation, and the command structure will be in a downward direction. In a ‘flat organisation’ power is distributed more evenly, but there will still be major differences in the level of power and authority between different members of the company. Some organisations such as the armed forces or police have many tiers (or levels) and are tall in their hierarchy. Universities, however would have few levels between those at the bottom and those at the top and would be considered a ‘flat hierarchy.’ The ‘span of control’ (number of people an individual manages or supervises directly) is closely linked to the type of organisational hierarchy that exists. Many of the new ‘buzzwords’ and ‘flavour of the month theories’ that Mr. Whitehead mentions are no more than a current evaluation of the theories of yesteryear. The re-visiting of these theories will provide conclusive evidence that management theory is central to the modern manager’s education.

The Work of Frederick Winslow Taylor (1856-1915)

Frederick Taylor, whilst working as a gang boss in a lathe department in Midvale, USA became determined to eradicate ‘systematic soldiering’; an attempt by workers to do no more than was necessary. Taylor developed a strategy where particular jobs were studied, then broken down into individual tasks, which had to be completed exactly as stated. Each task was allocated a time, based on the timed work of the quickest worker. Workers were then allocated specific tasks, and were not allowed to deviate from that task at all. As Taylor believed that money was the main motivator, a payment was made for each completed unit of output (piece rate)

Many organisations and work methods are still influenced by Taylor’s concept of ‘Scientific Management Methods’ This can be seen on factory assembly lines, and even in the commercial kitchen, where each member of staff is allocated a small but specific task in making up a completed gourmet meal. Piece rates may not be prevalent, but the allocation of boring, repetitive tasks is common. An article in The Sunday Times, 3rd April 1983 tells of one worker’s plight, assembling the Maestro car at the Cowley Plant. He had just one hundred seconds to screw on two rubber buffers and fit three small plates to the rear wheel arch. He had been given one night’s training, completed his task on exactly 246 vehicles per day, and had 46 minutes per shift of ‘relaxation time’.

Some of Taylor’s early followers achieved spectacular results in increasing output. However, the stringent and oppressive tactics that were employed often led to industrial unrest. After ‘Scientific Management Methods’ were employed at the Watertown Arsenal, immediate strikes ensued. The American Congress eventually banned Taylor’s time and motion studies in its defense industry.

The use of such methods in the modern workplace can produce useful results in the short term, but for longer-term rewards they must be balanced against the effects on workforce morale. To assume that everybody can work at the same rate as the fastest worker, and that money is the only real motivator may not be borne out. Today’s workers want to be empowered, and to take an active role in their organisations, not be treated like machines where only the end product is important.

Henry Laurence Gantt

Henry Gantt worked for Taylor at the Bethlehem Steel Works. His ideas were broadly supportive of Taylor’s ideas, but he added a more humanizing approach. He believed that scientific management was used in an oppressive way by the unscrupulous. Gantt moved away from the strict piece rate system of pay, instead offering a set wage plus 20% – 50% bonuses. If workers achieved the set objectives within the day a bonus would be paid. Supervisors were introduced who also received bonuses if targets were met by his team.

Gantt’s less oppressive regime can be seen today in many organisations. In factories around the globe workers receive bonuses for achieving daily, weekly or monthly targets.

The Work of Henri Fayol (1841-1925)

Henri Fayol, the ‘Father of Modern Management Theory’ was interested in how management worked, and could be applied on a universal basis. His theories focused on Rules, Roles and Procedures.

Fayol’s ‘Five Elements of Management’ are:

* Planning Setting objectives, and strategies, policies and procedures to achieve them.

* Organising Setting tasks to achieve the objectives. Allocating the tasks to groups or individuals, and empowering those responsible for that task.

* Commanding Instructing those carrying out the given task.

* Coordinating Ensuring a common approach by groups to meet the objectives of the organisation.

* Controlling Ensuring the performance of individuals and groups fits with the plans, and correcting as necessary.

Fayol’s theories are as relevant today as they ever were, and most, if not all managers use his ‘elements of management’.

The Work of Peter Drucker

Drucker’s work in the 1950′s followed on from that of Fayol. He had five categories of ‘Management Operations’

* Setting Objectives Senior Managers organise objectives into targets. This is cascaded down to more Junior Managers.

* Organising The workload is divided into manageable activities and jobs.

* Motivating This involves communicating and creating the right conditions for targets to be achieved.

* Measurement Comparing performance against targets.

* Development Enabling people to use their talents.

Fayol and Drucker had very different views on the role of workers within their theories. Fayol’s work has a distinct leaning towards worker’s having to be told what to do, their work checked and corrected, with managers delegating tasks and overseeing from a high level (a Tall Hierarchy?). Conversely, Drucker’s ethos is about the empowerment of workers, giving them the opportunity to utilise their talents, with managers occupying a role that is more about assisting and coaching workers.

Fayol’s ideas fail to take into account the people within the workplace, whereas Drucker takes a somewhat more humanist approach.

Elton Mayo – The Human Relations Approach

By the 1930′s there was evidence emerging that production could be raised by applying motivational methods within a workforce. These ideas were very different to the techniques of F.W Taylor and, although concerned with profit, the ‘human relations approach’ to management was also concerned with social relations in the organisation. The approach assumed that workers were genuinely committed to their companies and that they had a desire to work towards achieving its goals.

Elton Mayo had carried out experiments at the Hawthorne Plant, and these sought to find ways to improve production by changing workers conditions and pay structures. Mayo worsened conditions for workers, then returning them to how they were. The rise in output was due to workers communicating more and working as a tighter team unit. It was also found that the effect of taking an interest in workers made them feel important and that their opinions were valued.

Volvo and Honda have seen the development of work team in recent years, with the differences between workers and managers being far from obvious. People wear the same uniforms, and the emphasis on communication is high. Developing cohesive teams who work well together and share the same goals ensures a high level of motivation for the tasks required. The structure of this type of organisation could be considered a ‘flat hierarchy’ with a wide span of control for managers working over a skilled and competent workforce. Subordinates are well trained and a good level of trust between managers and workers exists.

The ‘Human Relations Approach’ is definitely a positive way of management for the 21st Century, where personal empowerment and self-esteem should not be in question.

Mr Whitehead’s view that “Haven’t generations of managers done perfectly well by learning on the job and applying a bit of common sense” cannot accurately be quantified. Within the Fire Service, promotion to managerial roles is based on internal qualifications and interview alone. Virtually all managers have based their management style on exactly what Mr. Whitehead advises in his letter. Some are very good and are respected as such; however there are a large number who cannot manage people or their responsibilities within the organisation. Respect for leadership within the fire service is essential, but often rare in modern times. Managers who had an in depth knowledge of management strategy may well motivate the workforce to new heights. This type of ‘tall hierarchical’ organisation has many tiers of command with spans of control for senior managers being relatively small, with the widest spans of control being at junior management level.

“An endless supply of new gurus spin off new batches of buzzwords which help successive generations of whiz kids to get promoted on the basis of slogans” is not an accurate depiction of the modern manager. It’s certainly true that there are managers who, even with the background of a management related education are ineffectual in their roles. This is not a reflection on management theory. Studies of management styles allow one to make informed decisions, and to have an array of options at your disposal, and to adapt to the ever-changing pressures on the organisation, both internal and external.

“Meanwhile real managers just do what they have always done, maintaining discipline and telling people what to do” The idea of a ‘one style fits all’ manager is unrealistic, and one that has a proven track record of leading to unrest. Even within one organisation the manager or managers need to be flexible within their roles. Leadership is vital, but a leader who is flexible, approachable, and has the interest and aspirations of both workers and organisation at the forefront of their strategy will flourish. Conversely, the manager who’s only interest is the level of output and profit will not be supported by those producing that output. Respect is most certainly a two-way avenue.

My review of the theories of ‘management gurus’ of the past is designed to show that these ideas are not new. One can look at any organisation and see many of these ideas working in parallel. As far as organisational structure is concerned, one cannot make stereotypical assumptions based purely on the size of the organisation or the number of employees. The style of management and the systems of work employed all help to define the structure. Most organisations employ many of the characteristics discussed above, in different ways, and at different times dependent on the dynamics of the situation. Most businesses are constantly evolving and redefining themselves to meet the requirements of the modern marketplace. There is no correct answer, or one style which is superior to others. Each has its positive and negative points, but without fundamental knowledge of them all, how can one possibly manage effectively?

Behavioral Management Theory

During the 1920s and 1930s, the United States was experiencing another force of upheaval not unlike that caused by the Industrial Revolution. Though more limited in scope, it had similar ramifications on the way people work and on the way managers manage those who work.

Culturally and socially the United States was undergoing change. People were moving to the cities in greater numbers. Rapid economic growth was giving people the opportunity to spend money on leisure and household items their parents could only dream about. Women were given the right to vote, unions were now organized and were playing an integral role in politics and the economy, and the first minimum-wage legislation had been passed. Prior to the stock market collapse of 1929, a genuine sense of optimism had swept the country, and values and attitudes toward government, people, families, and work were being transformed. As a result, many of the techniques applied by the classical theorists to the workplace no longer seemed to work effectively.

Several prominent theorists began to direct their attention to the human element in the workplace. Elton Mayo, Mary Parker Follett, Douglas McGregor, Chris Argyris, and Abraham Maslow were writers who addressed this issue by contending that increased worker satisfaction would lead to better performance. It was their belief that a greater concern by management for the work conditions of the employee would generate higher levels of satisfaction; thus evolved behavioral management theory.

Elton Mayo

One prominent pioneer of the behavioral school was Elton Mayo (1880 1949), an Australian psychologist who joined the Harvard Business School faculty in 1926. Convinced that economic incentives only partially explained individual motivation and satisfaction,’ Mayo worked with Fritz Roethlisberger, William Dickson, and others to formulate theories concerning the factors that increased human motivation and satisfaction which were later to become the foundations of the human relations movement in management. Their ideas did not have wide circulation, however, until they were asked to assist in a research project that had apparently failed.

In 1924, a research team launched an experiment at the Hawthorne plant of the Western Electric Company in Cicero, Illinois. Their experiment was designed to identify factors other than fatigue that would diminish worker productivity. Initially, it was believed that physical surroundings (e.g., noise, light, humidity) would have an impact on productivity. Testing was conducted by selecting two groups of women who would perform an assembly operation, with each group in a separate room. One group was to be the control group, working in a room where no change in the physical surroundings would be made. The second group would perform their tasks under changing physical conditions. As various features of the physical surroundings were altered in the second room, the researchers would record the level of output and compare it with the output of the control group.

One such alteration of the physical surroundings was the level of lighting. Illumination was increased in stages, and the researchers recorded an increase in output as well. To further test their hypothesis, the light was dimmed. Much to their surprise, output by the women increased again. Even when the light level was reduced to the point where it resembled moonlight, output increased. What made this finding even more difficult to interpret was that the control group was also increasing its output without any alteration in the physical surroundings. Increased output was also obtained when the researchers expanded the length of the workday and eliminated rest periods. Indeed, many of the women reported that they were more satisfied with their jobs than before the experiments began.

In 1927, Mayo and his team were called in to assist in the interpretation of the results and to conduct further experiments as needed. One such experiment was to alter supervisory authority so that the women could determine on their own when they would take a rest break. Another was to increase the salary of the women in the experimental group while the women in the control group would keep the same pay. Again, productivity went up in both groups. After several years of intensive study, Mayo and his colleagues began to piece together what was happening. First, they concluded that financial incentives did not influence productivity since output went up in both groups though only the experimental group received more pay. Instead, they learned through interviews and observation that an “emotional chain reaction” was causing the increase in productivity?” Having been singled out to be participants in the experiment, the women developed a group pride that motivated them to increase their performance. No longer did they feel that they were isolated individuals in the plant; now they felt they were part of an important group. The support received from their supervisors and the opportunity to make decisions about their job contributed to this motivation.

Mayo and his colleagues realized that an important contribution to the study and practice of management had evolved from a seemingly failed experiment. First, the Hawthorne study suggested that workers were not so much driven by pay and working conditions as by psychological wants and desires which could be satisfied by belonging to a work group. Second, giving workers responsibility for decisions concerning the task, whether as individuals or in a group, was a stimulus to treat the task as more important. And finally, recognition by superiors made workers feel that they were making a unique and important contribution to the organization.

The Hawthorne experiment was a turning point in the study of management, suggesting that a worker is not simply an extension of the machinery. As the results of the study became known among theorists and practitioners alike, an outpouring of research was conducted based on many theories and discoveries made in psychology. Thus, the Hawthorne study opened the study of management to a whole new arena of ideas from the social sciences that had previously been ignored. And, as an unintended contribution to research methodology, the experiments led to a rethinking of field research practices. That is, the researcher can influence the outcome of the experiment by being too closely involved with the subjects who are participating in the experiment. This outcome, referred to as the Hawthorne effect in research methodology, is exemplified by subjects behaving differently because of the active participation of the Hawthorne researchers in the experiment.

Mary Parker Follett

Mary Parker Follett (1868-1933) was born near Boston and was educated at Radcliffe College and Cambridge University, studying politics, economics, philosophy, and law. Her successful work on committees set up to work out solutions to community problems led eventually to a concentration on the study of industrial management, with a particular interest in techniques for resolving conflicts in organizations.
Follett was a pragmatist who believed that conflict was neither good nor bad. She hypothesized that managers could resolve conflict in one of four ways: (1) one side giving in, (2) one side forcing the other to submit, (3) compromise, and (4) integration. Follett believed the first two alternatives were undesirable as they required the threat or actual use of power. Compromise was also unsatisfactory, merely postponing the conflict by not addressing the issues that led to the conflict. With integration, however, the efforts of both sides to identify the solution, according to Follett, would lead to discussion and resolution of the issues that caused the conflict.

Douglas McGregor

A theorist who shared the views of Mayo and his colleagues was Douglas McGregor (1906-1964). McGregor felt that organizations were often designed based on faulty assumptions about human behavior. Those assumptions were that most workers disliked work, that workers preferred to be directed by supervisors rather than assume responsibility for their tasks, and that workers were more interested in monetary gains than in performing their jobs well. Because of these assumptions, McGregor felt that managers were prone to design organizations that were centralized in decision making, established numerous rules and regulations, and required close supervision of subordinates. For fear of technical and financial inefficiency, McGregor felt that organizations overemphasized control mechanisms.

Labeling these assumptions Theory X, McGregor developed an alternative set of assumptions which he labeled Theory Y. His Theory Y assumptions are that workers Can enjoy their work under favorable conditions and can provide valued input to the decision-making process. Rather than develop needless mechanisms of control in the organization, McGregor felt that managers should emphasize coordination of activities by providing assistance to workers when problems are identified.

Chris Argyris

Chris Argyris (1923-) also expanded on the work of the Hawthorne experiment by challenging the basic assumptions of the classical school concerning worker motivation and satisfaction. Argyris argued that an overemphasis on control by managers encouraged workers to become passive and dependent and to shirk responsibility. As a result, workers will become frustrated and dissatisfied with the workplace and will either quit their jobs or engage in behaviors that hamper the achievement of organizational goals. Many of his ideas were developed from the belief that as people mature, they develop new attitudes and behaviors that affect their life-styles. Some of these attitudes and behaviors are a movement toward independence, a broadening of interests, greater diversity in activities, and a desire to assume more control over their lives. Organizations that emphasize control are, in actuality, treating individuals as if they were immature.

Abraham Maslow

Abraham Maslow (1908-1970) is most noted for suggesting a theory that humans are motivated by needs that exist in a hierarchy. At the bottom of the hierarchy are the physiological needs for food and shelter. Once these basic needs are satisfied, humans are then motivated to satisfy higher-level needs for safety, love, esteem, and self-actualization.’ In Maslow’s theory, a person moves up the ladder of needs as each level is satisfied.

Evaluation of the Behavioral School

Contributors to the behavioral school advanced our understanding of management by emphasizing the importance of the individual within the organization-an element essentially ignored by writers of the classical school. That is, social needs of individuals, group processes, and subordinate-superior relationships were all identified as integral components in the practice of management. No longer could managers confine their attention to technical skills. Rather, they had to use people skills as well and develop an understanding of the relationship between the technical and human sides of management.

However, the behavioral school did not completely resolve issues concerning the nature of human motivation. Later studies were to dispute the belief that worker satisfaction was the prime cause of productivity. Under certain conditions, satisfaction was found to play an inconsequential role. In addition, though money may not be the primary motivator, salaries do at times affect worker productivity, particularly in industries where salaries are low, causing high rates of absenteeism and turnover. Much like classical theory, behavioral theory also assumed that the external environment of the organization was static. Thus, the psychological and social dimensions of the individual only partially explain organizational outcomes and constitute only a part of the larger and more complex managerial picture.