Management is defined as the process of administering or organizing people and coordinating the various activities necessary for the achievement of defined goals. It is the administration of an organization, whether it is a business, a not-for-profit organization, or government body. Management includes the activities of setting the strategy of an organization and coordinating the efforts of its employees or volunteers to accomplish its objectives through the application of available resources, such as financial, natural, technological and human resources. The term ‘management’ may also be used to refer to the people who manage an organization.
Management is often included as a factor of production along with machines, materials, and money. According to the management guru Peter Drucker (1909-2005), the basic task of management includes both marketing and innovation. The practice of modern management originates from the 16th century study of low-efficiency and failures of certain enterprises, conducted by the English statesman Sir Thomas More (1478-1535). Management consists of the interlocking functions of creating corporate policy and organizing, planning, controlling, and directing an organization’s resources in order to achieve the objectives of that policy.
The size of management can range from one person in a small organization to hundreds or thousands of managers in multinational companies. In large organizations, the board of directors defines the policy which is then carried out by the chief executive officer, or CEO. Some people agree that in order to evaluate a company’s current and future worth, the most important factors are the quality and experience of the managers.
In order to understand current management thought, it is necessary to examine the historical links. It is best to consider not only management pioneers’ management thoughts, but also the contextual and environmental factors that helped to clarify the developmental process behind those thoughts. Adam Smith and James Watt have been identified as the two men most responsible for launching the world toward industrialization. Adam Smith brought about the revolution in economic thought and James Watt’s steam engine provided cheaper power that revolutionized English commerce and industry. In doing so, they laid the foundation for modern notions of business management theory and practice.
The early management thought
Adam Smith (1723–1790) established the ‘classical school’ and became the father of liberal economics. Smith argued that market and competition should be the regulators of economic activity and that tariff policies were destructive. The specialization of labor was the mainstay of Smith’s market system. According to Smith, division of labor provided managers with the greatest opportunity for increased productivity. James Watt (1736–1819) developed his first workable steam engine in 1765. Steam power lowered production costs, lowered prices, and expanded markets. In 1800 the sons of Boulton and Watts took over the management of the company and instituted one of the first complete applications of scientific management, including market research, including machine layout study involving workflow, production standards, cost accounting, employee training, employee incentives, and employee welfare programs.
The division of labor, combined with the advances in technology, provided the economic rationale for the factory system. However, the factory system brought new problems for owners, managers, and society. Four management pioneers proposed solutions for coping with the pressures of the new large-scale industrial organizations. These included:
Robert Owens (1771–1858) was a successful socialist entrepreneur who sowed the first seeds of concern for the workers. He was repulsed by the working conditions and poor treatment of the workers in the factories across Scotland. Owen became a reformer, reducing the use of child labor and introduced the use of moral persuasion rather than corporal punishment in his factories. Owen deplored the evils of the division of labor and in his ideal system believed each man would do a number of different jobs switching easily from one job to another.
Charles Babbage (1792–1871) is known as the patron saint of operations research and management science. Babbage’s scientific inventions included a mechanical calculator, a versatile computer, and a punch-card machine. His projects never became a commercial reality; however, Babbage is considered the originator of the concepts behind the present day computer. Babbage discussed the economic principles of manufacturing, and analyzed the operations; the skills used and suggested improved practices. Babbage believed in the benefits of division of labor and was an advocate of profit sharing. He developed a method of observing manufacturing that is the same approach utilized today by operations analysts and consultants analyzing manufacturing operations.
Andrew Ure (1778–1857) provided academic training for managers in the early factory system. He published a text in 1835 that dealt mainly with the technical problems of manufacturing in the textile industry, but also dealt with problems of managing. Ure advocated an ‘automatic plan’ to provide harmony and to keep any individual worker from stopping production. He was a defender of the factory system and believed workers must recognize the benefits of mechanization and not resist its introduction.
Charles Dupin (1784–1873) pioneered industrial education in France. He is credited with having a great influence on the writings of Henri Fayol. Dupin published ‘the Discourse on the Condition of the Workers’ in 1831, a manuscript that included concepts such as time study and the need to balance workloads after introducing division of labor. He wrote of the need for workers to receive concise instructions and the need to discover and publish the best way to perform work with the least amount of worker energy.
The scientific management era
Since management relied heavily on engineers for advice in the new factories, it is not surprising that associations of engineers were some of the first to examine and write about management problems. The American Society of Mechanical Engineers (ASME) was founded in 1880 and was one of the first proponents of the search for scientific management.
Henry Towne began applying systematic management practices as early as 1870. In 1866 he suggested that ASME become a clearinghouse for information on managerial practices, since there was no management association. Towne also published several papers and a book, Evolution of Industrial Management, on the use of ‘gain sharing’ to increase worker productivity. Frederick A. Halsey was another engineer who wrote papers presented to ASME outlining his ideas about wages. He attacked the evils of profit sharing and proposed a special ‘premium plan’ for paying workers based on time saved. Halsey proposed incentives based on past production records, including a guaranteed minimum wage and a premium for not doing work. Halsey’s plan and ideas had a major influence in the United States and Great Britain on the design of pay schemes.
Unlike many industries, the rail-road industry forced managers to develop special ways of managing a labor force that was dispersed over a wide geographical area. Daniel McCallum (1815–1878) became general superintendent of the Erie Railroad in 1854. He developed principles of management that included discipline, division of labor, detailed job descriptions, promotion and pay based on merit, frequent and accurate reporting of worker performance, and a clearly defined chain of command. McCallum also designed a formal organizational chart and a sophisticated information management system using the telegraph.
Fredrick W. Taylor (1856-1915), considered the most famous management pioneer of all is the father of scientific management. In trying to overcome soldiering by the workers, Taylor began a scientific study of what workers ought to be able to produce. This study led to the beginnings of scientific management. Taylor used time studies to break tasks down into elementary movements, and designed complementary piece-rate incentive systems.
Taylor believed management’s responsibility was in knowing what you want workers to do and then seeing that they do it in the best and cheapest way. He developed many new concepts such as functional authority. In other words, Taylor proposed that all authority was based on knowledge, not position. In 1911, Taylor published Principles of Scientific Management in 1911. Its contents would become widely accepted by managers worldwide. The book described the theory of scientific management. Scientific management was defined as methods aimed at determining the one best way for a job to be done.
Henry Gantt (1861–1919) worked with Taylor at the Midvale Steel Company and was considered a Taylor disciple. Gantt felt the foreman should teach the workers to be industrious and cooperative which, in turn, would facilitate the acquisition of all other knowledge. Gantt also designed graphic aids for management called Gantt charts using horizontal bars to plan and control work. Gantt called for the scientific study of tasks, movements, working conditions, and worker cooperation. He also focused on the connection between the involvement of management and financial interests.
While Taylor, the Gilbreths, Gantt, and Emerson were working with industrial enterprises, Morris Cooke (1872–1960) was extending the gospel of efficiency in non-industrial organizations. Cooke focused his attention on educational and municipal organizations. Cooke conducted a study of administration in educational organizations funded by the Carnegie Foundation for the Advancement of Teaching. The resulting study was a bombshell in the academic world. Cooke’s findings included, among other things, widespread use of inbreeding (hiring your own graduates), inefficient committee management, autonomous departments working against university coordination, and pay based on tenure.
While the efficiency engineers studied mechanical efficiency, the industrial psychologists studied human efficiency, with the same goal in mind of improving productivity. The father of industrial psychology was Hugo Munsterberg (1863–1916). In 1892, Munsterberg established his psychological laboratory at Harvard, which was to become the foundation stone in the industrial psychology movement.
Munsterberg published a book Psychology and Industrial Efficiency (1913), which contained three parts. Part one, the ‘best possible man,’ was a study of the demand jobs made on people, and the importance of finding people whose mental capabilities made them well-matched for the work. Part two, the ‘best possible work,’ described the psychological conditions under which the greatest output might be obtained from every worker. Part three, the ‘best possible effect,’ examined the necessity of creating the influences on human needs that were desirable for the interests of business.
Walter Dill Scott (1869–1955) was interested in employee attitudes and motivation in production and devised a system, adopted by the army, for classifying personnel and testing officer candidates. From March 1910 till October 1911, Scott wrote a series of articles entitled The Psychology of Business later published in System magazine. These articles were based on actual business cases and represented one of the earliest applications of the principles of psychology to motivation and productivity in industry.
The administrative management era
Henri Fayol (1841–1925) formulated and wrote papers about his ideas of administrative theory as early as 1900. His first mention of the ‘elements’ of administration came in a book published in 1916. Fayol identified the major elements or functions of management as planning, organization, command, coordination, and control. Planning and organization received the majority of his attention in his writings. Fayol believed that management could be taught, that managerial ability was sorely needed as one moved up the ladder, and that management was a separate activity applicable to all types of undertakings. Fayol’s fourteen principles of management included: division of labor, authority, discipline, unity of command, unity of direction, subordination of individual interests to the general interest, remuneration, centralization, scalar chain, order, equity, stability of tenure of personnel, initiative, and morale.
Peter Drucker (1909) made an enduring contribution to understanding the role of manager in a business society. Unlike the previous Fayolian process texts, Drucker developed three broader managerial functions: a) managing a business; b) managing managers; and c) managing workers and work. He proposed that in every decision the manager must put economic considerations first. Drucker recognized that there may be other non-economic consequences of managerial decision, but that the emphasis should still be placed on economic performance.
The modern era of Total Quality Management
A quality revolution swept through the business sector during the latter part of the twentieth century. The universal term used to describe this phenomenon was ‘total quality management’ or TQM. This revolution was led by a small group of quality gurus, the most well-known were W. Edwards Deming (1900–1993) and Joseph Juran (1904).
- Edwards Deming (1900–1993) is considered to be the father of quality control in Japan. Deming suggested that most quality problems are not the fault of employees, but the system. He emphasized the importance of improving quality by suggesting a five-step chain reaction. This theory proposes that when quality is improved: 1) costs decrease because of less rework, fewer mistakes, fewer delays, and better use of time and materials; 2) productivity improves; 3) market share increases with better quality and prices; 4) the company increases profitability and stays in business; and 5) the number of jobs increases.
Joseph Juran’s experience led him to conclude that more than 80 percent of all quality defects are caused by factors within management’s control. He referred to this as the ‘Pareto principle.’ He developed a management trilogy that included quality planning, control, and improvement. Juran suggested that an area which has experience chronic quality problems should be selected, analyzed, and then a solution is generated and finally implemented.
References
- Deming, W. Edwards (2000). Out of the Crisis. Cambridge, MA: Massachusetts Institute of Technology.
- Duncan, W. Jack (1989). Great Ideas in Management: Lessons from the Founders and Foundations of Managerial Practice. San Francisco, CA: Jossey-Bass.
- Gazell, J.A (2000). Drucker on Effective Public Management. Journal of Management History 6, no. 1: 48–62.
- Gibson, Jane Whitney, Richard M. Hodgetts, and Jorge M. Herrer (1999). Management History Gurus of the 1990s: Their Lives, Their Contributions. Journal of Management History 5, no. 6 (1999): 380–397.
- Lewis, P.S., S. H. Goodman, and P.M. Fandt (2005). Management: Challenges for Tomorrow’s Leaders. Cincinnati, OH: Thompson South-Western.
- Robbins, Stephen R., and David A. DeCenzo (2004). Fundamentals of Management. Upper Saddle River, NJ: Pearson Prentice Hall.
- Spigener, J.B. (2001). What Would Deming Say? Quality Progress 34, no. 3: 61–64.
- Wrege, Charles D., Ronald G. Greenwood, and R. Greenwood (1997). A New Method of Discovering Primary Management History: Two Examples Where ‘Little Things Mean A Lot.’ Journal of Management History 3, no. 1: 59–92.
- Wren, Daniel A. (2004) The Evolution of Management Thought. New York, NY: John Wiley & Sons.
- Wren, Daniel A., Arthur G. Bedeian, and J.D. Breeze. (2002). The Foundations of Henri Fayol’s Administrative Theory. Management Decision 40, no. 9: 906–918.
- Wren, Daniel A., and Ronald G. Greenwood (1998). Management Innovators. New York, NY: Oxford University Press.