The Evolution of Management Theory

Chapter
two
The Evolution of
Management Theory
Learning Objectives
1.
Describe how the need to
4.
Trace the changes that have
increase organizational efficiency
occurred in theories about
and effectiveness has guided the
how managers should behave
evolution of management theory.
in order to motivate and control
employees.
2.
Explain the principle of job
specialization and division of
5.
Explain the contributions of man-
labour, and tell why the study of
agement science to the efficient
person–task relationships is cen-
use of organizational resources.
tral to the pursuit of increased
efficiency.
6.
Explain why the study of the
external environment and its
3.
Identify the principles of admin-
impact on an organization has
istration and organization that
become a central issue in
underlie effective organizations.
management thought.

---

A Case in Contrast
Changing Ways of
Making Cars
Car production has changed dramatically over
tion, moving conveyor belts bring the car to the
the years as managers have applied different
workers.
views or philosophies of management to orga-
Each individual worker performs a single
nize and control work activities. Prior to 1900,
assigned task along a production line, and the
workers worked in small groups, cooperating to
speed of the conveyor belt is the primary means
hand-build cars with parts that often had to
of controlling their activities. Ford experimented
be altered and modified to fit together. This sys-
to discover the most efficient way for each indi-
tem, a type of small-batch production, was very
vidual worker to perform an assigned task. The
expensive; assembling just one car took con-
result was that each worker performed one
siderable time and effort; and workers could
produce only a few cars in a day. To reduce
costs and sell more cars, managers of early
car companies needed better techniques to
increase efficiency.
Henry Ford revolutionized the car industry. In
1913, Ford opened the Highland Park car plant
in Detroit to produce the Model T. Ford and his
team of manufacturing managers pioneered the
development of mass-production manufactur-
ing, a system that made the small-batch system
almost obsolete overnight. In mass produc-
In 1913, Henry Ford revolutionized the production process of
a car by pioneering mass-production manufacturing, a
production system in which a conveyor belt brings each car
This photo, taken in 1904 inside Daimler Motor Co., is an
to the workers, and each individual worker performs a single
example of the use of small-batch production, a production
task along the production line. Even today, cars are built
system in which small groups of people work together and
using this system, as shown in this photo of workers along a
perform all the tasks needed to assemble a product.
computerized automobile assembly line.

---

34
Chapter Two
specialized task, such as bolting on the door or attaching the door handle, and jobs
in the Ford car plant became very repetitive.1
Ford’s management approach increased efficiency and reduced costs so much
that by 1920 he was able to reduce the price of a car by two-thirds and sell over
two million cars a year.2 Ford Motor Company (www.ford.com) became the lead-
ing car company in the world, and many competitors rushed to adopt the new
mass-production techniques. Two of these companies, General Motors (GM)
(www.gm.com) and Chrysler (www.chryslercorp.com), eventually emerged as Ford’s
major competitors.
The CEOs of GM and Chrysler—Alfred Sloan and Walter Chrysler—went beyond
simple imitation of the Ford approach by adopting a new strategy: offering customers
a wide variety of cars to choose from. To keep costs low, Henry Ford had offered cus-
tomers only one car—the Model T. The new strategy of offering a wide range of mod-
els was so popular that Ford was eventually forced to close his factory for seven
months in order to reorganize his manufacturing system to widen his product range.
Due to his limited vision of the changing car market, his company lost its competitive
advantage. During the early 1930s, GM became the market leader.
The next revolution in car production took place not in the United States but in
Japan. A change in management thinking occurred there when Ohno Taiichi, a
Toyota production engineer, pioneered the development of lean manufacturing in
the 1960s after touring the US plants of the Big Three car companies. The man-
agement philosophy behind lean manufacturing is to continuously find methods to
improve the efficiency of the production process in order to reduce costs, increase
quality, and reduce car assembly time.
In lean manufacturing, workers work on a moving production line, but they are
organized into small teams, each of which is responsible for a particular phase of car
assembly, such as installing the car’s transmission or electrical wiring system. Each
team member is expected to learn all the tasks of all members of his or her team,
and each work group is charged with the responsibility not only to assemble cars but
also to continuously find ways to increase quality and reduce costs. By 1970,
Japanese managers had applied the new lean production system so efficiently that
they were producing higher-quality cars at lower prices than their US counterparts,
and by 1980 Japanese companies were dominating the global car market.
To compete with the Japanese, managers at the Big Three car makers visited
Japan to learn lean production methods. In recent years, Chrysler Canada has
been the North American model for speed in automobile production. Chrysler’s
Windsor, Ontario assembly plant opened in 1928, and over 54 years built its first
five million vehicles. Less than 11 years later, in 1994, the plant reached the eight-
million mark.3
Chrysler’s Windsor facility has made a reputation for itself as “the biggest single
experiment with flexible manufacturing methods at one site.”4 In the last 20 years, the
plant has been so successful that Ken Lewenza, president of Local 444 of the
Canadian Auto
Canadian Auto Workers, describes it as “Chrysler’s high-pressure plant, always
Workers
expected to meet peak demand for the firm’s most popular products.”5 On July 24,
www.caw.ca/
2000, the plant reopened its doors after being shut down for just two weeks to retool
for the newest generation of DaimlerChrysler AG minivans, due in dealers’ showrooms
a month later. That was by far Windsor’s quickest turnover, but flexible manufacturing
procedures introduced in 1983 have enabled the plant to display North America’s
speediest production turnovers. In 1982–83, the plant shut down for 16 weeks to retool
from making sedans to the first models of the Chrysler minivan, and then in 1995, it
closed for 12 weeks for retooling to produce the next generation of minivans.
While the Windsor facility has been a model for quick turnarounds, Canada’s
auto industry in general has fared well with the advancements in lean production
methods. One analyst suggested that Canada is “in the golden era of the auto sec-
tor in Canada,” with a chance to outpace Michigan as early as 2001.6
q

---

The Evolution of Management Theory
35
Overview As this sketch of the evolution of global car manufacturing suggests, changes in
management practices occur as managers, theorists, researchers, and consultants
seek new ways to increase organizational efficiency and effectiveness. The driving
force behind the evolution of management theory is the search for better ways to
utilize organizational resources. Advances in management theory typically occur
as managers and researchers find better ways to perform the principal manage-
ment tasks: planning, organizing, leading, and controlling human and other orga-
nizational resources.
In this chapter, we examine how management theory concerning appropriate
management practices has evolved in modern times, and look at the central con-
cerns that have guided its development. First, we examine the so-called classical
management theories that emerged around the turn of the twentieth century. These
include scientific management, which focuses on matching people and tasks to
maximize efficiency; and administrative management, which focuses on identify-
ing the principles that will lead to the creation of the most efficient system of orga-
nization and management. Next, we consider behavioural management theories,
developed both before and after the Second World War, which focus on how man-
agers should lead and control their workforces to increase performance. Then we
discuss management science theory, which developed during the Second World
War and which has become increasingly important as researchers have developed
rigorous analytical and quantitative techniques to help managers measure and con-
trol organizational performance. Finally, we discuss business in the 1960s and
1970s and focus on the theories that were developed to help explain how the exter-
nal environment affects the way organizations and managers operate.
By the end of this chapter, you will understand the ways in which management
theory has evolved over time. You will also understand how economic, political,
and cultural forces have affected the development of these theories and the ways
in which managers and their organizations behave. Figure 2.1 summarizes the
chronology of the management theories that are discussed in this chapter. q
Scientific Management Theory
The evolution of modern management began in the closing decades of the nine-
teenth century, after the industrial revolution had swept through Europe, Canada,
and the United States. In the new economic climate, managers of all types of
Figure 2.1
The Evolution of Management Theory
Organizational Environment Theory
Management Science Theory
Behavioural Management Theory
Administrative Management Theory
Scientific Management Theory
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000

---

36
Chapter Two
organizations—political, educational, and economic—were increasingly trying to
find better ways to satisfy customers’ needs. Many major economic, technical, and
cultural changes were taking place at this time. The introduction of steam power
and the development of sophisticated machinery and equipment changed the way
in which goods were produced, particularly in the weaving and clothing indus-
tries. Small workshops run by skilled workers who produced hand-manufactured
products (a system called crafts production) were being replaced by large factories
in which sophisticated machines controlled by hundreds or even thousands of
unskilled or semiskilled workers made products.
Owners and managers of the new factories found themselves unprepared for
the challenges accompanying the change from small-scale crafts production to
large-scale mechanized manufacturing. Many of the managers and supervisors
had only a technical orientation, and were unprepared for the social problems that
occur when people work together in large groups (as in a factory or shop system).
Managers began to search for new techniques to manage their organizations’
resources, and soon they began to focus on ways to increase the efficiency of the
worker–task mix.
Job Specialization and the Division of Labour
The Adam Smith
The famous economist Adam Smith was one of the first to look at the effects of
Institute
different manufacturing systems.7 He compared the relative performance of two dif-
www.adamsmith.org.uk/
ferent manufacturing methods. The first was similar to crafts-style production, in
which each worker was responsible for all of the 18 tasks involved in producing a
pin. The other had each worker performing only 1 or a few of the 18 tasks that go
into making a completed pin.
Smith found that factories in which workers specialized in only 1 or a few tasks
had greater performance than factories in which each worker performed all 18
pin-making tasks. In fact, Smith found that 10 workers specializing in a particular
task could, between them, make 48 000 pins a day, whereas those workers who
performed all the tasks could make only a few thousand at most.8 Smith reasoned
that this difference in performance was due to the fact that the workers who spe-
cialized became much more skilled at their specific tasks, and, as a group, were
thus able to produce a product faster than the group of workers who each had to
job specialization
perform many tasks. Smith concluded that increasing the level of job specializa-
The process by which a
tion—the process by which a division of labour occurs as different workers spe-
division of labour occurs as
cialize in different tasks over time—increases efficiency and leads to higher
different workers specialize
organizational performance.9
in different tasks over time.
Based on Adam Smith’s observations, early management practitioners and the-
orists focused on how managers should organize and control the work process to
maximize the advantages of job specialization and the division of labour.
F.W. Taylor and Scientific Management
Frederick W. Taylor (1856–1915) is best known for defining the techniques of
scientific management
scientific management, the systematic study of relationships between people and
The systematic study of
tasks for the purpose of redesigning the work process to increase efficiency. Taylor
relationships between
believed that if the amount of time and effort that each worker expended to pro-
people and tasks for the
duce a unit of output (a finished good or service) could be reduced by increasing
purpose of redesigning the
specialization and the division of labour, then the production process would
work process to increase
become more efficient. Taylor believed that the way to create the most efficient
efficiency.
division of labour could best be determined by means of scientific management
techniques, rather than intuitive or informal rule-of-thumb knowledge. Based on
his experiments and observations as a manufacturing manager in a variety of set-
tings, he developed four principles to increase efficiency in the workplace:10

---

The Evolution of Management Theory
37
• Principle 1: Study the way workers perform their tasks, gather all the informal job
knowledge that workers possess, and experiment with ways of improving the way tasks
are performed.
To discover the most efficient method of performing specific tasks, Taylor stud-
ied in great detail and measured the ways different workers went about perform-
ing their tasks. One of the main tools he used was a time-and-motion study, which
involves the careful timing and recording of the actions taken to perform a par-
ticular task. Once Taylor understood the existing method of performing a task, he
tried different methods of dividing and coordinating the various tasks necessary to
produce a finished product. Usually this meant simplifying jobs and having each
worker perform fewer, more routine tasks, as at the pin factory or on Ford’s car
assembly line. Taylor also sought ways to improve each worker’s ability to per-
form a particular task—for example, by reducing the number of motions workers
made to complete the task, by changing the layout of the work area or the type of
tool workers used, or by experimenting with tools of different sizes.
• Principle 2: Codify the new methods of performing tasks into written rules and standard
operating procedures.
Once the best method of performing a particular task was determined, Taylor
specified that it should be recorded so that the procedures could be taught to all
workers performing the same task. These rules could be used to standardize and
simplify jobs further—essentially, to make jobs even more routine. In this way, effi-
ciency could be increased throughout an organization.
• Principle 3: Carefully select workers so that they possess skills and abilities that match
the needs of the task, and train them to perform the task according to the established rules
and procedures.
To increase specialization, Taylor believed workers had to understand the tasks
that were required and be thoroughly trained in order to perform the tasks at the
required level. Workers who could not be trained to this level were to be transferred
to a job where they were able to reach the minimum required level of proficiency.11
• Principle 4: Establish a fair or acceptable level of performance for a task, and then
develop a pay system that provides a reward for performance above the acceptable level.
To encourage workers to perform at a high level of efficiency, and to provide
them with an incentive to reveal the most efficient techniques for performing a
task, Taylor advocated that workers should benefit from any gains in performance.
They should be paid a bonus and receive some percentage of the performance
gains achieved through the more efficient work process.
Why might scientific
By 1910, Taylor’s system of scientific management had become known and, in
management lead to an
many instances, faithfully and fully practised.12 However, managers in many orga-
increase in labour union
nizations chose to implement the new principles of scientific management selec-
participation?
tively. This decision ultimately resulted in problems. For example, some managers
using scientific management obtained increases in performance, but rather than
sharing performance gains with workers through bonuses as Taylor had advo-
cated, they simply increased the amount of work that each worker was expected
to do. Many workers experiencing the reorganized work system found that as
their performance increased, managers required them to do more work for the
same pay. Workers also learned that increases in performance often meant fewer
jobs and a greater threat of layoffs, because fewer workers were needed. In addi-
tion, the specialized, simplified jobs were often monotonous and repetitive, and
many workers became dissatisfied with their jobs.
Scientific management brought many workers more hardship than gain, and
left them with a distrust of managers who did not seem to care about their well-
being.13 These dissatisfied workers resisted attempts to use the new scientific

---

38
Chapter Two
Charlie Chaplin tries to extricate a fellow employee from the machinery of mass production in this clip
from Modern Times. The complex machinery is meant to represent the power that machinery has
over the worker in the new work system.
management techniques and at times even withheld their job knowledge from
managers to protect their jobs and pay.
Unable to inspire workers to accept the new scientific management techniques
for performing tasks, some organizations increased the mechanization of the work
process. For example, one reason for Henry Ford’s introduction of moving con-
veyor belts in his factory was the realization that when a conveyor belt controls
the pace of work (instead of workers setting their own pace), workers can be
pushed to perform at higher levels—levels that they may have thought were
beyond their reach. Charlie Chaplin captured this aspect of mass production in
one of the opening scenes of his famous movie, Modern Times (1936). In the film,
Chaplin caricatured a new factory employee fighting to work at the machine-
imposed pace but losing the battle to the machine. Henry Ford also used the prin-
ciples of scientific management to identify the tasks that each worker should
perform on the production line and thus to determine the most effective way to
create a division of labour to suit the needs of a mechanized production system.
From a performance perspective, the combination of the two management
practices—(1) achieving the right mix of worker–task specialization and (2) linking
people and tasks by the speed of the production line—makes sense. It produces the
huge savings in cost and huge increases in output that occur in large, organized
work settings. For example, in 1908, managers at the Franklin Motor Company
redesigned the work process using scientific management principles, and the out-
put of cars increased from 100 cars a month to 45 cars a day; workers’ wages
increased by only 90 percent, however.14 From other perspectives, though, scien-
tific management practices raise many concerns. The definition of the workers’
rights not by the workers themselves but by the owners or managers as a result of

---

The Evolution of Management Theory
39
the introduction of the new management practices raises an ethical issue, which
we examine in this “Ethics in Action.”
Ethics in Action
Fordism in Practice
From 1908 to 1914, through trial and error, Henry Ford’s talented team of pro-
duction managers pioneered the development of the moving conveyor belt
and thus changed manufacturing practices forever. Although the technical
aspects of the move to mass production were a dramatic financial success for
Ford and for the millions of Americans who could now afford cars, for the
workers who actually produced the cars, many human and social problems
resulted.
With simplification of the work process, workers grew to hate the monotony
of the moving conveyor belt. By 1914, Ford’s car plants were experiencing huge
employee turnover—often reaching levels as high as 300 or 400 percent per year
as workers left because they could not handle the work-induced stress.15 Henry
Ford recognized these problems and made an announcement: From that point
on, to motivate his workforce, he would reduce the length of the workday from
nine hours to eight hours, and the company would double the basic wage from
US$2.50 to US$5.00 per day. This was a dramatic increase, similar to an
announcement today of an overnight doubling of the minimum wage. Ford
became an internationally famous figure, and the word “Fordism” was coined
for his new approach.16
Ford’s apparent generosity was matched, however, by an intense effort to
control the resources—both human and material—with which his empire was
built. He employed hundreds of inspectors to check up on employees, both
inside and outside his factories. In the factory, supervision was close and con-
fining. Employees were not allowed to leave their places at the production line,
and they were not permitted to talk to one another. Their job was to concen-
trate fully on the task at hand. Few employees could adapt to this system, and
they developed ways of talking out of the sides of their mouths, like ventrilo-
quists, and invented a form of speech that became known as the “Ford Lisp.”17
Ford’s obsession with control brought him into greater and greater conflict with
managers, who were often fired when they disagreed with him. As a result,
many talented people left Ford to join his growing rivals.
Outside the workplace, Ford went so far as to establish what he called the
“Sociological Department” to check up on how his employees lived and the
ways in which they spent their time. Inspectors from this department visited the
homes of employees and investigated their habits and problems. Employees
who exhibited behaviours contrary to Ford’s standards (for instance, if they
drank too much or were always in debt) were likely to be fired. Clearly, Ford’s
effort to control his employees led him and his managers to behave in ways that
today would be considered unacceptable and unethical, and in the long run
would impair an organization’s ability to prosper.
Despite the problems of worker turnover, absenteeism, and discontent at Ford
Motor Company, managers of the other car companies watched Ford reap huge
gains in efficiency from the application of the new management principles. They
believed that their companies would have to imitate Ford if they were to survive.
They followed Taylor and used many of his followers as consultants to teach them
how to adopt the techniques of scientific management. In addition, Taylor elabo-
rated his principles in several books, including Shop Management (1903) and The

---

40
Chapter Two
Principles of Scientific Management (1911), which explain in
detail how to apply the principles of scientific manage-
ment to reorganize the work system.18
Taylor’s work has had an enduring effect on the man-
agement of production systems. Managers in every orga-
nization, whether it produces goods or services, now
carefully analyze the basic tasks that must be performed
and try to devise the work systems that will allow their
organizations to operate most efficiently.
The Gilbreths
Two prominent followers of Taylor were Frank Gilbreth
(1868–1924) and Lillian Gilbreth (1878–1972), who refined
Taylor’s analysis of work movements and made many con-
A scene from Cheaper by the Dozen illustrating how
tributions to time-and-motion study.19 Their aims were to
“efficient families,” such as the Gilbreths, use formal family
(1) break up into each of its component actions and ana-
courts to solve problems of assigning chores to different
family members and to solve disputes when they arise.
lyze every individual action necessary to perform a partic-
ular task, (2) find better ways to perform each component
action, and (3) reorganize each of the component actions so that the action as a
whole could be performed more efficiently—at less cost of time and effort.
The Gilbreths often filmed a worker performing a particular task and then sepa-
rated the task actions, frame by frame, into their component movements. Their goal
was to maximize the efficiency with which each individual task was performed so that
gains across tasks would add up to enormous savings of time and effort. Their
attempts to develop improved management principles were captured—at times quite
humorously—in the movie Cheaper by the Dozen, which depicts how the Gilbreths (with
their 12 children) tried to live their own lives according to these efficiency principles
and apply them to daily actions such as shaving, cooking, and even raising a family.20
Eventually, the Gilbreths became increasingly interested in the study of fatigue.
They studied how the physical characteristics of the workplace contribute to job
stress that often leads to fatigue and thus poor performance. They isolated factors—
such as lighting, heating, the colour of walls, and the design of tools and
machines—that result in worker fatigue. Their pioneering studies paved the way for
new advances in management theory.
In workshops and factories, the work of the Gilbreths, Taylor, and many others
had a major effect on the practice of management. In comparison with the old
crafts system, jobs in the new system were more repetitive, boring, and monoto-
nous as a result of the application of scientific management principles, and work-
ers became increasingly dissatisfied. Frequently, the management of work settings
became a game between workers and managers: Managers tried to initiate work
practices to increase performance, and workers tried to hide the true potential effi-
ciency of the work setting in order to protect their own well-being.21
Administrative Management Theory
Side by side with scientific managers studying the person–task mix to increase effi-
administrative
ciency, other researchers were focusing on administrative management, the study
management The study
of how to create an organizational structure that leads to high efficiency and effec-
of how to create an organi-
tiveness. Organizational structure is the system of task and authority relationships
zational structure that leads
that control how employees use resources to achieve the organization’s goals. Two
to high efficiency and
of the most influential views regarding the creation of efficient systems of organiza-
effectiveness.
tional administration were developed in Europe. Max Weber, a German professor
of sociology, developed one theory. Henri Fayol, the French manager who devel-
oped a model of management introduced in Chapter 1, developed the other.

---

The Evolution of Management Theory
41
The Theory of Bureaucracy
Max Weber (1864–1920) wrote at the turn of the twentieth century, when Germany
was undergoing its industrial revolution.22 To help Germany manage its growing
industrial enterprises at a time when it was striving to become a world power,
bureaucracy A formal
Weber developed the principles of bureaucracy—a formal system of organization
system of organization and
and administration designed to ensure efficiency and effectiveness. A bureaucratic
administration designed
system of administration is based on five principles (summarized in Figure 2.2).
to ensure efficiency and
effectiveness.
• Principle 1: In a bureaucracy, a manager’s formal authority derives from the position he
or she holds in the organization.
authority The power to
Authority is the power to hold people accountable for their actions and to
hold people accountable for
make decisions concerning the use of organizational resources. Authority gives
their actions and to make
managers the right to direct and control their subordinates’ behaviour to achieve
decisions concerning the
organizational goals. In a bureaucratic system of administration, obedience is
use of organizational
owed to a manager, not because of any personal qualities that he or she might pos-
resources.
sess—such as personality, wealth, or social status—but because the manager occupies
a position that is associated with a certain level of authority and responsibility.23
• Principle 2: In a bureaucracy, people should occupy positions because of their performance,
not because of their social standing or personal contacts.
This principle was not always followed in Weber’s time and is often ignored
today. Some organizations and industries are still affected by social networks in
which personal contacts and relations, not job-related skills, influence hiring and
promotional decisions.
• Principle 3: The extent of each position’s formal authority and task responsibilities, and
its relationship to other positions in an organization, should be clearly specified.
When the tasks and authority associated with various positions in the organiza-
tion are clearly specified, managers and workers know what is expected of them
Figure 2.2
Weber’s Principles of Bureaucracy
System of written
rules and standard
operating procedures
that specify how
employees should
behave.
Clearly specified
Clearly specified
A bureaucracy
system of task and
hierarchy of
should have a:
role relationships.
authority.
Selection and
evaluation system
that rewards
employees fairly
and equitably.

---