Reading: Lesson 2 - The Historical Development of Management

1.2.A - The Historical Development of Management 

1. THE EARLIEST FORMS OF MANAGEMENT

1. Today, the smallest part-time businesses, the newest entrepreneurial business ventures, and the largest global corporations require management. Small business owners decide how much time to devote to their work, where to do the work, how much personal money must be invested, and how to price and market products and services. Entrepreneurs with visions of building the next Subway or Facebook develop business plans, secure investors, hire talented employees, and manage the growth of their businesses. Giant international businesses require managers versed in the cultures and laws of many countries. These same managers need to be able to utilize the skills of diverse work teams. They also need to be prepared to manage a large portfolio of products and compete with other businesses to satisfy the ever-changing demands of customers.
   
2. The first managers had to rely on their instincts, intuition, and experience to decide how to organize work and operate their businesses. Some of the earliest civilizations organized large numbers of people to accomplish seemingly impossible tasks. The Incas in South America, Egyptians in northern Africa, and Chinese in eastern Asia are a few examples. These remarkable societies accomplished great feats of engineering and construction. They organized vast agricultural enterprises and developed systems of commerce and finance. These efforts required planning and the management of people and other resources. Often the work involved large numbers of workers completing difficult tasks. In most cases the emphasis was on getting the job done with little concern for the health and safety of the workers.
   
3. Until the development of technology and machines began near the end of the seventeenth century, most work was completed using manual labor. Governments often undertook the large-scale projects of society that required massive numbers of laborers or vast amounts of resources to complete. On the other end of the spectrum, individuals and families worked to provide goods and services needed for everyday living. Small businesses developed in many societies as transportation and trade allowed people to specialize in their work. Whether working alone, in family groups, or operating large government projects, management was required to plan and complete the work with the available resources.
   

2. THE INDUSTRIAL REVOLUTION

1. The invention of advanced machines that allowed for the faster processing of raw materials began the transformation of work and business, leading to the Industrial Revolution. The Industrial Revolution was the era of the eighteenth and nineteenth centuries in which machine power replaced human and animal power in the production process, leading to major business and social changes. Rather than individual artisans completing work on each product, businesses could hire workers to operate the new machines. The result was greater production and a larger number of products for sale. The invention of the steam engine and the harnessing of waterpower contributed to the development and expansion of businesses that produced a variety of new products.
   
2. The Industrial Revolution had its beginnings in Western Europe and then spread to the United States and around the world. It had particular impact on the textile industry, coal and metal mining, and agriculture. With the use of machines, people could complete much more work in the same amount of time. Factories were built to house the machines, provide workspace for the employees, and store the raw materials and finished products. When completed, the products needed to be transported to businesses that used them in their own production or to customers who purchased them for personal use. Products were moved first by road and river, and then by large ships at sea. The invention of the steam and gasoline engines increased transportation choices to include railroads, steam powered ships, automobiles, and trucks. The transportation industry and retail trade expanded as a result.
   
3. The economic expansion spawned by the Industrial Revolution required a new approach to business operations. Money was needed to build the factories, buy the equipment, and obtain the materials needed for production. Employees needed to be hired and prepared for the new types of work as machine operators rather than craftsmen. Finished products had to be sold and transported to customers. A small number of people were needed to make the decisions, supervise the employees, and ensure the factories operated efficiently and profitably. These were the business managers.
   
4. The Industrial Revolution changed businesses and business practices. Many people were needed to mine the coal and minerals and to operate the mills and factories. The goal of the business owners was to produce as many products as could be sold. As they organized the new factories and other businesses, they often had little concern for working conditions or safety.
   
5. Employees worked long 12 to 14 hour days, six or seven days a week. They worked in hot, dark, crowded spaces without breaks or vacations. They were inadequately trained to operate the new and sometimes dangerous equipment, resulting in frequent worker injuries. If the business owners could not find enough adults to operate their business, they would turn to young children to do the work. The Industrial Revolution resulted in new types of business and employment opportunities, the growth of cities, and a higher standard of living for many. However, it also created large, complex businesses that were difficult to manage and a growing set of economic and social problems.
   

3. HENRY FORD’S REVOLUTION

1. Prior to the Industrial Revolution’s factory system, craftsmen often would build a finished product by themselves or with the help of other workers in the craftsmen’s shop. The factory system forced many craftsmen to become factory workers and specialize on tasks or become production supervisors. Employees in these factories lost power and control over their work. Ensuring quality was enforced through audits and inspections of finished products instead of by asking workers if there were better ways to produce the products.
   
2. A second Industrial Revolution started in the United States in the beginning of the twentieth century. Henry Ford was an automotive entrepreneur in the early 1900s. In 1903, Henry Ford’s new Ford Motor Company began producing the Model A. This car was originally built by a team of craftsmen. In 1913, Ford introduced a moving assembly line to produce its newest auto—the Model T. This reduced the time to manufacture the Model T chassis from 12.5 to 1.5 hours. The efficiency gained in the assembly line lowered the price of the Model T.
   
3. Assembly line workers did not enjoy performing the same task continuously, and Ford had a large turnover of labor. To reduce turnover, Ford introduced two innovations. The first was a shorter workday (from nine hours to eight hours) and a shorter workweek (from six days to five days), for a 40-hour workweek. Second, Ford offered a wage of $5 a day. This was twice the pay most factory workers earned. After these announcements, over 10,000 people showed up to try to get a job at Ford Motor Company. Ford was able to hire the best, most productive workers, which again contributed to lower costs.
   
4. The 8-hour day allowed for three work shifts, and the increased pay enabled Ford workers to purchase Ford cars and enjoy more leisure time, helping to build the middle class. Ford was so successful that over a nineteen-year period, his company built over 15 million Model T’s. At one time, the Model T accounted for half of the cars sold around the world. The 8-hour day and the 40-hour workweek, along with the higher factory worker wage, was not appreciated by other manufacturing companies. They needed to follow Ford’s lead or risk losing their best employees. The 40-hour workweek and higher minimum wage became a standard in the United States.
   
   Changing Approaches to Management: As the economy expanded and as problems emerged, some business leaders recognized that their operating practices were not good for either employees or businesses. They were interested in learning how businesses could be run more effectively and efficiently. They began to examine ways to improve business practices and to pass on that knowledge to the people who were running the business. Those efforts to improve business management led to the beginning of management science. Management science is the careful, objective study of management decisions and procedures in order to improve the operation of businesses and organizations. 
   
   

4. THEORIES OF MANAGEMENT

1. Managing is not easy. Determining the best ways to manage an organization has been an issue facing business leaders for nearly two centuries. Business leaders and researchers began to study management practices shortly after the start of the Industrial Revolution, and that study continues today. Several theories of management have been developed and tested. Among the most widely accepted are classical management, administrative management, behavioral management, and most recently, quality management.
   
2. Classical management was the first effort to apply scientific study to business activities. Classical management studies the way work is organized and the procedures used to complete a job in order to increase worker productivity. Work areas are arranged to make parts and materials readily accessible in order to speed up work. The most efficient employees are studied to identify the best assembly or work methods, which are then taught to other employees. Organizations using classical management may use experiments to try to develop ways to improve the organization of workspace and work procedures to increase efficiency.
   
3. One of the early leaders in the development of classical management was Frederick W. Taylor. An engineer by training, Taylor worked in factories and steel mills in the United States during the late 1800s. He believed that, if allowed to make their own decisions, most workers would not choose the most productive methods of working. They would need clear instructions and close supervision to work efficiently.
   
4. Taylor believed there was one best way to do every job. In order to determine the best way, he observed workers completing tasks. Using precise time and motion measurements, Taylor and his researchers worked to identify the least number of steps, the most efficient layout of work, and the fastest work procedures to complete a task. Taylor developed the idea of compensating employees using a piece rate where employees are paid based on the amount of work they produce. Classical management was widely accepted and implemented in businesses in the late 1800s and through the first two decades of the 1900s.
   
5. While classical management experts focused on increasing worker productivity, another group of experts was concentrating on improving the overall management of growing businesses. Their ideas became known as administrative management. Administrative management identifies the most effective practices for organizing and managing a business. From administrative management came the concepts of having multiple levels of management, organizing businesses into specialized departments, and defining the type of work all managers must complete for an organization to operate effectively.
   
6. An early proponent of administrative management was Henri Fayol, a French businessman. Fayol first described the common functions of management—planning, organizing, commanding, coordinating, and controlling. He also identified 14 characteristics of an effective organization. Many of those characteristics are still recognized in organizations today, including:
   
   • Authority and responsibility—managers have the authority to assign tasks. They can delegate responsibility to others but must give the needed authority as well.
   
   • Unity of command—each employee must receive direction from only one manager to avoid conflicts and to maintain a clear line of authority. 
   
   • Unity of purpose—the goals and direction of an organization must be clear and supported by everyone. • Adequate compensation—the wages and benefits for every employee should be fair and satisfactory to both the individual and the organization.
   
   • Esprit de corps—organizations should work to build good interpersonal relationships, a sense of teamwork and harmony.
7. The earliest approaches to management were directed at organizing work and creating efficient procedures. They had little concern for the effects of changes on employees. Recognizing the growing worker dissatisfaction in many companies, a group of management experts began to focus on the relationship between managers and employees and developed the principles of behavioral management. Behavioral management is directed at organizational improvement through understanding employee motivation and behavior. Behavioral management is sometimes called human relations management.
8. The focus of behavioral management is developing a work environment in which workers believe they are a valuable part of the organization and they are motivated to do their best. That is most likely to occur when there are positive relationships between managers and employees. This approach suggests that managers should find ways to improve working conditions and increase worker satisfaction, which will lead to better performance.
9. The first efforts to implement behavioral management began in U.S. factories in the 1920s. Researchers led by Elton Mayo experimented with changing the amount of light in employee work areas. They found that increasing the light resulted in higher productivity. Surprisingly, however, they also found that if they then began decreasing the light, productivity continued to climb. They conducted several related experiments and obtained similar results. They concluded that when employees felt managers were concerned about them and were attempting to improve working conditions, they were willing to work harder. This response of people behaving differently when they receive attention is known as the Hawthorne effect. The name comes from Western Electric’s Hawthorne Works factory where the first experiments were conducted.
10. Another important contributor to behavioral management was Douglas McGregor, who developed Theory X and Theory Y. Theory X managers think that employees will not work to their greatest potential without close supervision. Theory Y managers believe that employees will work hard if they are involved in decisions about their work and are assigned meaningful tasks. McGregor believed managers interact differently with their employees depending on which of the theories they accept.
11. In the second half of the twentieth century, businesses were growing rapidly, expanding the number of products they produced, and looking for methods to speed production and cut costs. Assembly lines and modern technology allowed for the production of many products in a short period. Along with increased production, however, these advances caused some problems. The number of product defects increased, and production resources were wasted. This resulted in losses of time and money required to correct mistakes.
12. Japanese manufacturers were the first to take note of the growing problems. At the time, the perception of Japanese products was low cost and even lower quality. Japanese companies brought an American engineer, W. Edward Deming, to Japan to teach quality management, a new approach to management and operations. Quality management is a total commitment by everyone in an organization to improve the quality of procedures and products by reducing waste, errors, and defects. Quality management involves using facts and data to make decisions and continually looking for ways to make improvements. Training, participation, and commitment are hallmarks of quality management.