Company

• Is an “ artificial person” : created by law

• Separate legal entity: contract, buy, borrow, sue/get sued
• Perpetual succession: members go but company continues
• Common seal
• Limited liability
• Managed by Board of Directors
• Shareholders are owners
• Professional management

BITS Pilani, Hyderabad Campus

Exhibit 1–10 Universal Need for Management

MGTSTS ZC 211
 BITS Pilani
Hyderabad Campus

:Management History- chapter 1 module

Why study history?

“When I want to understand what is happening today or try

to decide what will happen tomorrow, I look back” –
Oliver Holmes

Hundreds of people helped to plant the “seeds” from which

the “management” has grown….

Late eighteen – nineteenth century

BITS Pilani, Hyderabad Campus

Historical Background of
Management
Ancient Management
– Taj Mahal -32 million rupees; 22 years ; Indus Valley civilization

Adam Smith
– Published The Wealth of Nations in 1776
 Advocated the division of labor (job specialization) to increase
the productivity of workers eg: Pin manufacturing industry
 10 individuals -48000 pins/day (due to work specialization)
 10 workers separately can make only 10 pins per day

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 Industrial Revolution
– Substituted machine power for human labor
– Created large organizations in need of management

second half 19th century- (where & how to compete)

expansion of railroads- better access to distant market

Improved financial services- provided better access to
capital

• Mass production
-reduced transportation cost

BITS Pilani, Hyderabad Campus

Major Approaches to Management

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Major Approaches to
Management
Classical
Quantitative
Behavioral
Contemporary

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Scientific Management
Fredrick Winslow Taylor
– The “father” of scientific management
– Published Principles of Scientific Management (1911)
 The theory of scientific management
– Using scientific methods to define the “one best way” for a
job to be done:
• Putting the right person on the job with the correct tools
and equipment.
• Having a standardized method of doing the job.
• Providing an economic incentive to the worker.

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Taylors Pig Iron experiment

• Average daily output- load pig iron – 12.5 tons /worker

• Best method can bring output as 48-49 tons /day
• Subject for experiment- dutch guy- $1.85 instead of
$1.15/day
• Combination of procedures, techniques and tools

BITS Pilani, Hyderabad Campus

 Taylor’s Scientific Management Principles

1. Develop a science for each element of an individual’s work, which will

replace the old rule-of-thumb method.
2. Scientifically select and then train, teach, and develop the worker.
3. Heartily cooperate with the workers so as to ensure that all work is done
in accordance with the principles of the science that has been developed.

4. Divide work and responsibility almost equally between management

and workers. Management takes over all work for which it is better
fitted than the workers.

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BITS Pilani, Hyderabad Campus
Scientific Management (cont’d)
Frank and Lillian Gilbreth
– Focused on increasing worker productivity through the reduction of wasted
motion
– Developed the microchronometer to time worker motions and optimize work
performance

How Do Today’s Managers Use Scientific Management?

– Use time and motion studies to increase productivity
– Hire the best qualified employees
– Design incentive systems based on output

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BITS Pilani, Hyderabad Campus
General Administrative Theory
Henri Fayol
– Believed that the practice of management was distinct from other organizational
functions
– Developed principles of management that applied to all organizational situations
– Planning, organizing, commanding, coordinating and controlling

Max Weber
– Developed a theory of authority based on an ideal type of organization
(bureaucracy)
 Emphasized rationality, predictability, impersonality, technical
competence, and authoritarianism

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BITS Pilani, Hyderabad Campus
Fayol’s 14 Principles of Management

1. Division of work 7. Remuneration

2. Authority 8. Centralization

3. Discipline 9. Scalar chain

4. Unity of command 10. Order

5. Unity of direction 11. Equity

6. Subordination of 12. Stability of tenure

individual interests of personnel
to the general 13. Initiative
interest
14. Esprit de corps
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BITS Pilani, Hyderabad Campus
Weber’s Bureaucracy

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Quantitative Approach to
Management
Quantitative Approach
– Also called operations research or management science
– Evolved from mathematical and statistical methods developed to solve WWII
military logistics and quality control problems
– British has to fight with limited aircrafts with massive force of japan
– Military officers- “Whiz Kids” – joined ford motors
– Focuses on improving managerial decision making by applying:
 Statistics, optimization models, information models, and
computer simulations

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BITS Pilani, Hyderabad Campus
What Is Quality Management?
Intense focus on the customer
Concern for continual improvement
Process-focused
Improvement in the quality of everything
Accurate measurement
Empowerment of employees

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BITS Pilani, Hyderabad Campus
Understanding Organizational
Behavior
Organizational Behavior (OB)
– The study of the actions of people at work; people are the most important asset
of an organization

Early OB Advocates
– Robert Owen – Child labour Act
– Hugo Munsterberg- psychologist
– Mary Parker Follett- group dynamism
– Chester Barnard-
organization as social system include human
cooperation

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BITS Pilani, Hyderabad Campus
The Hawthorne Studies
•A series of productivity experiments conducted
at Western Electric from 1924 to 1932.

•Experimental findings
Productivity unexpectedly increased under imposed
adverse working conditions.
The effect of incentive plans was less than
expected.

•Research conclusion
Social norms, group standards and attitudes more
strongly influence individual output and work behavior
than do monetary incentives.
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BITS Pilani, Hyderabad Campus
BITS Pilani, Hyderabad Campus
The Systems Approach
System Defined
– A set of interrelated and interdependent parts arranged in a manner that
produces a unified whole.

Basic Types of Systems

– Closed systems
 Are not influenced by and do not interact with their
environment (all system input and output is internal).
– Open systems
 Dynamically interact to their environments by taking in inputs
and transforming them into outputs that are distributed into
their environments.

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The Organization as an Open
System

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BITS Pilani, Hyderabad Campus
Implications of the Systems
Approach
Coordination of the organization’s parts is essential for
proper functioning of the entire organization.
Decisions and actions taken in one area of the
organization will have an effect in other areas of the
organization.
Organizations are not self-contained and, therefore, must
adapt to changes in their external environment.

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BITS Pilani, Hyderabad Campus
The Contingency Approach
Contingency Approach Defined
– Also sometimes called the situational approach.
– There is no one universally applicable set of management principles (rules) by
which to manage organizations.
– Organizations are individually different, face different situations (contingency
variables), and require different ways of managing.

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BITS Pilani, Hyderabad Campus
 Popular Contingency Variables

• Organization size
• As size increases, so do the problems of coordination.
• Routineness of task technology
• Routine technologies require organizational structures,
leadership styles, and control systems that differ from
those required by customized or non-routine
technologies.
• Environmental uncertainty
• What works best in a stable and predictable environment
may be totally inappropriate in a rapidly changing and
unpredictable environment.
• Individual differences
• Individuals differ in terms of their desire for growth,
autonomy, tolerance of ambiguity, and expectations.
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BITS Pilani, Hyderabad Campus