The evolution of Management.

Professor Mayo and his colleagues held a series of experiments on how working conditions affected output.

The researchers came to the conclusion that social relations among workers and their bosses affected output, quality of work and motivation. Another important finding was that a worker needed more than money and good working conditions to be productive. The feeling of belonging to a group and the status within that group strongly affected the behavior.

Human Relations Movement The Theory of . Douglas McGregor (1906-1964) introduced the concept that the attitudes managers hold about the nature of people greatly influence their behavior. His Theory X and Theory Y were ideal types describing typical management attitudes presented in terms of assumptions. The theory X managers behaved according to the following assumptions: * The average person dislikes work and will avoid it if possible; * The average employee has little ambition, prefers direction and desires job security above all other outcomes; * Most employees avoid taking on responsibilities; * Therefore, most people must be coerced, directed and closely supervised or threatened to get them to put in adequate effort to achieve organizational objectives. The Theory Y managers behaved according to the different set of assumptions: * The expenditure of effort, both physical and mental, is as natural as play or rest; * Control and direction are not the only means of stimulating effort; a person will exercise self-control and self-direction; * The average person learns, when encouraged, and is prepared to both accept and seek responsibility; * People are interested in demonstrating imagination, ingenuity and creativity to sokve organizational problems; * In most industrial jobs, employees’ intellectual potential is only partially tapped.

Management Science/Quantitative Approach

Management science is a quantitatively oriented discipline, studying such topics as time-and-motion experiments, inventory control, work flow, computers and systems theory.

This approach builds mathematical models and uses a wide range of mathematical techniques that have been developed to help organizations solve problems and optimize the supply. The tools used in Operation Research are probability theory, queuing and game theory, linear programming, decisions tree.

The approach is built around the idea of system. The idea is called synergy.

Within every organization there are many systems, from the company at large to the various departments and units within it. Division, departments and individuals all influence each other.

The systems concept is useful to managers because it helps them understand how their organizations function. The key features of systems: Holism. The system which has should be viewed as a whole; Open system. The system interacts with other systems; Hierarchy. An organization is a subsystem of the entire industry.

Contingency Approach.The focal point of this approach is the situation, the specific set of circumstances that influences the organisation most at a particular time. By this approach, managers can better understand exactly which techniques will best contribute to the achievement of organizational objectives in a particular situation. The methodology of the contingency approach can be expressed as a four-step process.

1. The manager must become familiar with the tools of the management profession.

2. Every management concept and technique has both advantages and disadvantages;

3. The manager needs to be able to interpret the situation properly;

4. The manager must be able to match the specific techniques with the fewest potential drawbacks to the specific situation.

10. Organising: Principles and Design

Organising is important in business; it helps to achieve its strategic objectives.

The organizing function is the process of breaking down the overall task into individual jobs along with delegated authority to do those jobs and then putting then back together in units, or departments, of an optimal size. The key elements in the organizing function are authority relationships and company structure. Authority relationships are based on the 4 key principles in organizing: hierarchy (a system of authority with different levels, one above the order. It is characterized), centralisation, specialisation and coordination.

The first, hierarchy principle, involves such elements as chain of command, bureaucracy, authority and responsibility. Chain of command - is hierarchy of managerial levels created by delegation of authority. Bureaucracy is a relationship between people at the top, such as directors or elected politicians, and their subordinates. They are written rules. Authority and responsibility is the formal right of a manager to act as a manager, i.e. to plan, decide, give instruction, allocate resources and control in order to achieve the aims of organization. 3 types of organizational authority can be identified: 1) Line authority - is the most fundamental type of authority within an organization. It reflects the existing superior-subordinate relationship, which involves the right of a superior to give orders to a subordinate. Line authority connected with the final product of a company. 2) Staff authority that are not integrated into the hierarchy, no bosses and subordinates. These people are usually busy with services. The activities of the staff departments include, for example, accounting, personnel or human resource, credit and advertising. 3) Functional authority.It was the first organizing system to be studied and developed. Functional authority implies dividing organizations into units with distinct tasks and responsibilities as well as grouping workers according to the broad task they perform.

The traditional functional departments of a business are production, marketing and finance. These are the broad activities or functions every business must perform to attain its objectives.

Centralisation refers to the level in the hierarchy at which decisions are made. It is closely connected with delegation of authority. Delegation is the process of assigning job duties and related authority to specific organization members. According to some scientists, there are 3 steps in the delegation process: *The first is to assign specific duties to the individual. *The second is to grant appropriate authority to the subordinate. *The last step is to create the obligation for the subordinate to perform the duties. The terms centralisation and decentralisation are used to describe the general degree of authority that is given to various levels of management. Decentralisationis decision-making at lower levels, nowadays decentralisation is a fashion. Centralisation implies that minimal amounts of job activities and authority have been delegated to subordinates by management, while decentralisation implies that significant amounts have been delegated. The possibilities for decentralization vary from firm to firm and time to time. Crisis, for example, leads to centralization.

The problem of delegating authority involves balancing the advantages and disadvantages of decentralization and centralization of authority. The benefits of centralization lie in gains in economic performance, taking advantages of economies of scale, avoiding wasteful conflict and competition among units, common policy, easier coordination and control, and quicker decision-making. Disadvantages of centralization are wasteful administration, poor motivation, excessive rules and control, stifle and initiative.

Advantages of decentralization:

1) The first advantage is that it encourages managers to develop their decision-making ability and take essential training for promotion into position of greater authority and responsibility.

2) The second advantage is competitive climate.

3) The third is more autonomy for managers, flexibility and profitability of the organization

4) Another plus is that decentralization helps to develop people, because staff get more responsibility, make more decision.

Disadvantages of decentralization:

1) More intensive and expensive management training.

2) More complicated planning and reporting methods

3) A third is that top management may be unwilling or unable to delegate authority.

Specialisation - is dividing tasks. The pluses of specialization: tasks are easier to learn, work becomes simpler, and training of people becomes easier and cheaper. The minus is that a single job becomes repetitive and boring. As with many other aspects, the problem concerns not whether specialization is good or bad, but finding its right pattern and degree. Coordination - is acting in unison and collaboration both within and between departments. Four basic methods can be distinguished to achieve coordination: 1)Line management 2) Liaison staff 3)Information systems 4)Cross-functional teams

General overview of organizational structures. The most common method of establishing formal relationships between resources n an organization is by establishing departments (a unique group of resources established by management to perform some organizational task), this process is called departmentalization. This process typically creates departments based upon such factors as the work functions being performed, the product being assembled, the territory being covered, the target customer and the process designed to manufacture product. Organisational structure means the relationship between positions and people who hold these positions. Organisation structures try to balance the need to specialize with the need to coordinate. Organisation charts or organograms describe organisational structures. Two dimensions of the chart are used to depict: 1)Hierarchy – number of levels, chain of command and span of control; and 2) Specialization – division of tasks between managers and deciding who is responsible for linking their work at each level.

Which organisation structure is best suited to the business is complicated issue. There are many forms organisation structure, one of them is functional form. It was invented by the French industrialist H. Fayol. Today, most large manufacturing organisations have a functional structure.

The functional type of organisation structure reflects an arrangement based on the nature of the activities that must be performed. The chief executive of each area occupies a position on the second level of the organisation and generally has the title of Vice-President. The structure’s most distinguishing feature is that staff managers may have line (functional) authority for their particular activities. The invention of the divisional or multi-divisional structure is attributed to Alfred Sloan who reorganized General Motors this way. Each division had its own engineering, production and sales departments, and made different category of product. Each division operates as if it is almost an autonomous business within the whole organisation. This type of organisation is valuable when:

the size of each division is sufficient for it to be able to provide its own specialists, such as accountants and specialists; and the work of each division is relatively independent so that their operations do not need close coordination A form of organisation structure that combines some aspects of both the functional and the product-manager types is the matrix structure. The unique feature of the matrix structure is that the personnel in the company’s functional divisions report to two or more superiors on the same level. Advantages of matrix organisations are the following: * integration of important functions * improved information flow * flexibility in response to changing market and competitive environments * managers report directly to those who is responsible Disadvantages are: * conflict between managers over range of responsibility * possible loss of efficiency through extra managerial overhead * stress caused by having several bosses with potentially conflicting interests

The network form is founded on the idea of disaggregation – separating major functions into independent units linked through a small core. Networks have advantages in the following aspects: they are more flexible structures, sharing resources and risk as well as reaching new markets.

The structure of any organisation should be a dynamic thing, adaptable to changing circumstances.

Motivation.

Motivation is the combination of internal processes and external forces that direct and sustain behaviour toward a goal. From a manager’s prospective, a person who is motivated works hard, sustains a pace of hard work and has self-directed behaviour toward important goals. Thus, motivation involves effort, persistence and goals. It involves a person's desire to perform. The term “motive” is a general term applying to the entire class of drivers, desires, needs, wishes and similar forces that cause people to do things. In general, all human needs can be divided into two large groups: innate needs (physiological) and acquired needs (social).

We can look at motivation is a chain reaction. It starts out with an unsatisfied need. The unsatisfied need causes tension within the individual and results in wants. This gives rise to tensions which cause action and lead the individual to engage in some kind of behaviour to satisfy a need and thereby reduce the tension. Achieving the goal satisfies the need and reduces the motive. When the objective is reached, the balance is restored and the process of motivation is complete. In reality, this chain is more complex than it looks (complex, conflicting motives).

The rewards that an organisation offers its employees determine the level of motivation. Organisational rewards include both intrinsic and extrinsic rewards. Intrinsic rewards are internal to an individual and normally derived from involvement with the job, from the process of performing a particular function. Most extrinsic rewards are directly controlled and distributed by the organisation and are more tangible than intrinsic rewards. The examples of extrinsic rewards are fringe benefits, pay and promotion. Intrinsic rewards are feeling of accomplishment, job satisfaction and personal growth. They are different but they are closely related. And extrinsic reward can result in intrinsic rewards. There are many motivational theories, but none of them provide the full, universally accepted explanation of human behaviour.

The traditional theory of motivation evolved from the work of Frederick W. Taylor and others in the scientific management movement. Taylor assumed that a man was driven by economic needs and the traditional motivation theory is based on the assumption that money is the primary motivator – employees will produce more for greater financial gain. Taylor's plan was unique in that he advocated one rate of pay for units produced up to the standard. Thus, under Taylor’s system, workers could in many cases significantly increase their pay by producing more than the standard.

The best known content theories are Maslow’s Hierarchy of Needs and Herzberg's Two Factor Theory. Maslow identified certain basic human needs and classified them in an ascending order of importance. The needs of an individual are said to exist in a hierarchy as follows: physiological, safety, social, esteem and self-actualisation.* (Physiological) pay, work environment, welfare * (safety needs) job security, pension, safe working conditions *(social needs) acceptance by colleagues *(esteem needs) status, job title and responsibilities * (self-actualisation needs) creativity, advancement, personal development. Until the needs of a lower level are satisfied, other needs will not motivate people. Maslow says that people satisfy their needs in a systematic way. When the need has been met, it stops being a motivating factor. Research into Maslow’s theory has not been very conclusive. Studies have tended to show that needs vary greatly among individuals. Another criticism of the need hierarchy is that needs overlap. Critics also state that Maslow’s need hierarchy is static. Needs change over time, in various situations, and when people make comparisons about their satisfaction and satisfaction of others.

Another theory of motivation, which has been very popular with managers, is Frederick Herzberg's “two factor” theory. He concluded that at work there are certain factors which cause job satisfaction while others lead to dissatisfaction. The set of items that influence the degree of job dissatisfaction is called hygiene or maintenance factors. They concern the work environment, job security, working conditions and salary. The group of factors bringing about satisfaction is called motivators. They relate to the work itself and include things like a challenging job, responsibility and whether or not the job contributes to the worker’s personal growth. Only if both the hygiene factors and motivators are properly maintained will motivation occur.

Main process theories are as follows: Equity theory by Adams and Vroom's expectancy theory. The Equity theory holds that, in deciding whether or not they are being treated equitably or fairly, people compare what they are giving to an organisation to what they are getting from the organisation. If there is an imbalance, the person takes the actions necessary to produce a balance between job inputs and outcomes. If the inputs are education and experience, the outputs are fringe benefits and job status. Inequity leads to tensions and efforts to restore the balance. There are several possible responses for the person affected by feelings of inequity. The person can: change outcomes, change inputs, distort perceptions or quit.

Reinforcement theoryconcentrates attention on the link between behaviour and consequences. Reinforcement is any effort that causes behaviour to be repeated or inhibited. Four types of reinforcement: positive reinforcement (satisfying consequences follow desired behaviour); negative reinforcement (removal of unpleasant effects after desired behaviour); punishment (negative consequences of undesired behaviour); extinction (withdrawal of rules).

The strategies applied in practice are related to job design. Job design is the identification and arrangement of tasks, which together form a job. It searches for a balance between job demands and the capacity of staff to satisfy them. There are two basic approaches to achieving a balance right and matching people to jobs and matching jobs to people.

Matching people to jobs: * establish clear expectations (may be make the nature of job clear to candidates); * job rotation (job rotation is periodically rotating work assignments) * earning relief (offering contingent time off)

Matching jobs to people: * job enlargement (involves adding more tasks of a similar nature to the job; increasing the scope) * job enrichment (changing key job characteristics: skill variety, task identity, task significance, authority, feedback from job) * flexitime (allow workers to complete their jobs within a 40-hour workweek, which they arrange themselves)

12. Global business: bridging nations and cultures

Globalisation is a process by which people of the world are unified into a single society and function together. This process is a combination of economic, technological, sociocultural and political forces. Globalisation is often used to refer to economic integration.

Forms of International Involvements.1)Trading, or Export-Import.2)Licensing - the right to use items recognased in law, such as patents, designs, works of art, trademarks, or other intangible assets. 3)Franchising is the system by which independent firms are authorised to use a common business system. 4)Cooperating, or Forming Strategic Alliances -Strategic alliances involve all types of cooperation between two or more partners for mutual benefit. 5)Investing.

Multinational, an organisation should operate in at least six countries and have no less than 20% of its sales or assets in those countries. An MNEnterprises is an enterprise that has its headquarters in one place (the home country) but has operations in others (the host countries). This is a form of international business in that it is involved in both trade and investment across frontiers. Multinational managers will spend much of their time working overseas. They will have to deal with people who have a different language, customs, religion and business practices.

The following points summarise the reasons why firms become MNEs:Reduction of costs;Avoid reliance on home base;Take opportunities abroad;Improve competitiveness;Respond to creation or removal of trade barriers;Improve operations;Apply knowledge.

II) Clash of Interests Multinationals are criticized by foreign governments for different reasons(legal,political, economic,cultural)

Cross-cultural studies look for the similarities and differences between people in different cultures. Howard V. Perlmutter concludes that the striking difference among firms lay in the state of mind of the managers. Three states of mind can be identified: ethnocentric, polycentric and geocentric. 1) Ethnocentric or home-country MNE: Regarding one’s culture as superior to others is an ethnocentric attitude. Business follows home-country practices and uses the home language. 2) Polycentric firms incorporate the notion that host-country cultures are difficult for the outsider to understand and local people know best. The branch should be allowed as much local character as possible. The polycentric MNEs is a group of companies that have a high degree of operating autonomy. 3) Geocentric or world MNE is beginning to emerge. Its ultimate goal is a worldwide approach both in headquarters and in the subsidiaries. Collaboration is important, creating worldwide standards for the company products with local variations. Promotion of managers is done on merit, not nationality.

The Dutch scholar Geert Holstede applied a wide-ranging questionnaire to 116000 IBM employees in 70 countries. He then used statistical methods, especially factor analysis, to find patterns among the data. Such methods led him to discover four such underlying factors, or cultural dimensions, later extended to five after studies from China were included. These factors are summarised and also show countries that score high or low on each scale. Hofstede’s work is a touchstone for those investigating cultural differences; it marks a switch from the descriptive work to analytical methods based on surveys and statistics.

Power distance (How far is unequal distribution of power, and hence distance between people, accepted?) Low power distance (Austria, Israel, New Zealand, Ireland, Norway) - High power distance (Malaysia, Panama, Ecuador, Arab countries, West Africa) Uncertainly avoidance (How much do people feel threatened by ambiguity and seek to minimize or avoid it?) Weak uncertainly avoidance (Singapore, Jamaica, UK, Malaysia) Strong uncertainly avoidance (Greece, Portugal, Belgium, Japan) Individualism (How far do people look after themselves and their immediate family only?) Individualist (Australia, USA, UK, Canada, Italy) Collectivist (Guatemala, Ecuador, Panama, Indonesia) Masculinity (How far do “masculine” values dominate society?) Masculine (Japan, Austria, Mexico, Venezuela, Germany, UK) Feminine (Sweden, Norway, Costa Rica, Yugoslavia, Finland, Chile) Long- term orientation (also called Confucian Dynamism) (Do people favour a pragmatic, future- oriented perspective?) Short- term (Australia, Canada, East Africa, Germany, UK, USA) Long- term (China, Japan, Taiwan).

Classifications of culturesInteraction between different peoples involves methods of communication as well as the process of gathering information. This brings us to the question that several hundred national and regional cultures of the world can be roughly classified into three groups.Task-oriented, highly organised planners (linear-active/data oriented): do one thing at a time, concentrate hard on that thing and do it within a scheduled timescale. These people think that in this way they are more efficient and get more done. A data-oriented culture is one that relies on research based on gathering solid information;People-oriented, loquacious interrelators (multi-active/ dialogue-oriented): they are very flexible. They follow a multi-active time system, that is, they do many things at once, often in an unplanned order. Multi-active people think they get more done their way;Introvert, respect-oriented listeners (reactive/ listening): they have large reserves of energy. They are economical in movement and effort and do not waste time reinventing the wheel. Reactive cultures as a rule listen carefully, establish understanding of the other’s intent, allow a period of silence in order to evaluate, query further, react in a constructive manner and try to attain perfection.