Jan 15, 2011

A brief history of the philosophy of Management: Part 2

(This is the second and the final part of a two part guest post by management researcher Kunal Sharma, on a brief History of the Philosophy of Management. He chronicles the evolution of management practices, their philosophical bases and the attendant historical circumstances. He is crisp, precise and impartially analytical and, operating with a bare minimum of factoids, keeps your freedom of thought intact)

  • The New Humanism

Douglas McGregor
In the last section we said that the time had come when organizations were ready to understand their most important constituents – the people. But every understanding will have different views. Though it might sound too harsh, but let us say that if we could start grouping people together in two different categories: in the first category we put those people who believe that people are by nature lazy and would avoid doing work until and unless they are forced to work. These people would, as obvious, think that workers in an organization would need guidance and control at all levels and it would be the organization’s responsibility to assign work to these people, control them, and put them in a strict hierarchy inside the organization. In the second category, we put those people who believe that people are by nature self motivated and exercise self control, therefore, no need for any control or a strict hierarchy. Douglas McGregor (1906 - 1964) was the person, a man of academia, who proposed the Theory X and Y. McGregor identified the people belonging to the first category as the managers who would focus more on authoritative approach to management (Theory X), while those falling in the second category as the one who would focus more on self-control by the workers (Theory Y). Self control by the workers would be thorough empowering the workers and giving them the responsibility for their task.

Theory X and Y were drawn upon the work of Abraham Maslow (1908 - 1970) who is noted for the conceptualization of a hierarchy of human needs. Maslow divided human needs in five different categories which formed a vertical hierarchy, viz. physiological, safety, love, esteem, and self-actualization. Maslow argued that fulfillment of first level of needs would lead to a desire to fulfill the second level and so on. The higher order needs (love, esteem, and self-actualization) can never be fulfilled in an environment where the dominant thought is Theory X. This way, a manager should first understand which needs are being fulfilled and thus what approach of management (whether Theory X or Theory Y) should she/he apply. Most of the times an organization would like to shift from X to Y and vice-versa depending upon the context.

Both Maslow and McGregor helped build a solid base for the modern day management concepts of job enrichment, self management work teams, etc. where the focus shifted from understanding the people to redesigning the organization to suit the needs of the people. It should be noted that both McGregor and Maslow had taken learnings from the field of psychology and applied them in the field of business management. This culture of interdisciplinary approach was further strengthened by psychologists like Frederick Irving Herzberg (1923 - 2000) in furthering the advancement of management theories. Herzberg was the proponent of Motivation-Hygiene theory, also known as the Two Factor theory of Job Satisfaction. The Two Factor theory states that job satisfaction comes primarily through the presence of motivator factors (recognition, promotion, etc) while job dissatisfaction is mainly because of absence of hygiene factors (status, job security, etc). The two factor theory emphasized the need to take into account the psychological and social needs of the workers. The Two Factor theory made a major contribution though by showing that satisfaction and dissatisfaction at work arose from different factors than by the presence or the absence of factors, which was the earlier belief. It was a major breakthrough as it gave business the management a new direction; wherein the organizations were now more clear on what factors to focus, at what time, and in what context. Organizations thus increasingly understood what motivated their most important constituent – the workers. Management thought was maturing at a faster rate, and it had travelled a long distance from the time where the focus was primarily on increasing technical efficiency; in the process it had learnt many lessons and had incorporated them in its learnings. Management thought had entered a new phase: it was time now when organizations would start looking outwards and try to understand its different stakeholders.

  • Modern Structural Organizational Theory 

In continuation of our discussion of management thought, we would try to focus on some of the major thoughts which came from some of the major names in the field of management sciences. To start with, let us focus on the thoughts of Chester Irving Barnard (1886 - 1961): to Bernard, business organizations were formal organizations where people cooperated with one another in a conscious, deliberate and purposeful manner. Bernard rejected the traditional idea of an organization having boundaries and one which comprised of a definite number of members. His model of an organization included the different stakeholders, viz. investors, suppliers, customers, and other who contributed to the firm even though they could not have been considered the members of the organization. Apart from redefining the meaning of an organization, Bernard also helped redefine explicitly the functions of the executive in his book “The Function of the Executive”, wherein he identified three basic goals functions of an executive: maintenance of morale, maintenance of a scheme of inducements, and maintenance of schemes of deterrents. It was Bernard, who would be influencing Elton Mayo through his model of an organization as a cooperative social system. 

Chester Barnard
Another model of organization was proposed by James D. Thomson (1920 - 1973) who analyzed the organization as Rational and Natural-System models. Thomson found that if we follow a closed-system strategy for studying organizations, we would arrive at rational model of organizations, while an open-system strategy would help us arrive at a natural-system model of organizations. Thomson found that the way organizations had developed with time, being increasingly complex, and facing a myriad of uncertainties, it would not be possible for any organization to follow any one of these strategies in an exclusive way. He proposed that in order to cope up with uncertainties and deal with the complexities organizations must take decisions in Bounded Rationality. Thomson’s view had a major impact on the management thoughts, as he had proposed a new model for the organizations, one in which the organizations functioned neither as totally rational, nor as a total natural system, but one which had the characteristics of both – one functioning under the limits of bounded rationality.

While the concept of bounded rationality helped find a middle way between the rational and natural-system model of organizations the work of Thomas J. Peters & Robert H. Waterman Jr. helped solve the mystery of balancing autonomy and control in the new age organizations. Peters and Waterman came up with the idea of “Loose-Tight Principle”, which they discussed in their book “In Search of Excellence”. After analyzing many countries all through the world, Peters and Waterman found out that successful organizations were those which focused on three factors: People, Customers, and Action. The introduction of these ‘soft factors’ was the contribution of these two researchers, which would help management give a new direction – from being too focused on mechanistic ways of management, to the incorporation of the organic thoughts, one which not only emphasized the importance of people to business success but also proved it through inductive reasoning.

It is time we discussed something about organizational structure. Henry Mintzberg made a major contribution to understanding of the organizational structure of the growing and complex organizations. In his book “The Structuring of Organizations” he described the five basic parts of organizations (the operating core, the middle line, technostructure, support staff, and strategic apex) and described how these parts do the coordinating activities (mutual adjustment, direct supervision, standardization of work processes, standardization of outputs, and standardization of skills) in order to cope up with uncertainties. His was a major contribution to understanding the emerging organization structure of the new age organizations. Mintzberg’s work also described the nature of tasks which the different parts of the organizations complete – how it divides the labor and how it utilizes coordinating activities to get the tasks done. Mintberg emphasized that the structure of the organizations evolve over a time period and thus are dependent on growth and contingencies; his model of the organizational structure was a major contribution to understanding how organizations change over time, how power shifts and how all these changes affect the organizational structure.  

It would be imprudent to not to introduce Paul R. Lawrence and Jay W. Lorsh, who published the article “Differentiation and Integration in Complex Organization” in the Administrative Science Quarterly (Volume 12, Issue 1). Through empirical research they proved that the relationship between organizational states and environmental requirements are dependent on environmental conditions, and that there is no one best way to organize; this contained within itself a message that those ways of organizing which take into account the internal as well as the external environment of the organizations would be highly effective. This was one of the researches which would sow the seeds of the Contingency Theory of organizations as we read it today.

  • Lessons from the East

As we can see most of the management thinking pertaining to the business environments had their roots in the Western Economies. But there was one economy which was making fast progresses. Japanese economy’s rich growth was sending a message to the western management thinkers that they needed to expand their horizon and look out for the lessons from the East. The management thinkers did respond: William Ouchy, an American Professor and author in the field of management came up with many new thoughts in his book “Theory Z: How American Management Can Meet the Japanese Challenge”; Ouchy found out that apart from Theory X and Y, there was a need for Theory Z, where the management tends to promote a stable environment by providing a job for life and taking care of the well-being of the employee and his family, both on and off the job. Ouchy analyzed the Japanese approach to management by comparing the Japanese companies and the American companies and found out key areas where the American companies could learn from their counterparts in Japan. Ouchy’s analysis helped introduce the concept of trust to management thought. He helped extend the horizon of management thinking – ideas from all round the world were now received gladly and were cherished.

  • The Learning Organizations

So our journey since now has led us to a state where we know that an organization increasingly becomes complex as it grows, and the more complex it becomes the more uncertainties it has to cope up with. The question, ‘is there a need for a new form of organization to handle the new complex situations in a more balanced way’? Don’t we need a shift in our approach to dealing with the organizations? Well, questions like these were asked and they were answered by authors of the age; Peter Michael Senge is one such author whose seminal work “The Fifth Discipline: A Shift of Mind” would have major impact in the way the modern world would look at the business organizations. Management thought had got a new direction. Senge looked at organizations as dynamical systems which are under a state of continuous adaptation and improvement. He was the one who introduced the concept of “Learning Organizations”: the need to become learning organizations, and the five disciplines (systems thinking, personal mastery, mental models, shared vision, and team learning) where the learning organizations excel. People now saw an organization, not as one continually fighting to cope with uncertainties, but one which continuously transforms itself by bringing changes within itself through the learnings of its members so that it is better prepared to face any eventuality. The organization had become mature, and so had the field of management thought. It is no wonder that the field of management education too had become mature even before the arrival of the next century.

  • The New Century

Peter Drucker
The new millennia would bring with it new challenges, increasing globalization would lead changes in the diversity of workforce as well as expand the markets of business organizations. With economies becoming interdependent, the challenges being faced by one economy would also have to be shared by other organizations, in a way the business organizations became a part of the global world, facing most of the challenges which the world faced, though in varying degrees. It was not that the organizations were unprepared for such changes. In fact, one of the greatest thinkers of management field, Peter F. Drucker had outlined some of the major challenges which the world would have to face. In his book, “Management Challenges for the 21st Century”, Druker identified Seven Old Assumptions of Management, and advocated Eight New Assumptions for the Coming Century. For Drucker, the change from 20th century to 21st century marked a period of profound transition, a transition which would bring with it changes in terms of uncertainties that organization would face; to contend these uncertainties, the organizations would have to rethink about the requirements for leadership, making the best out of the information revolution, dealing with the productivity of the knowledge workers, and lastly, the issues of self-management for the knowledge workers. Druker’s work wrote on the wall of management thinking, that a new age had arrived, where the management had new issues to take care of, new challenges to face, and more important, new roles to play. Management thought had taken one more leap – it had discovered a new land, with new opportunities, and a new set of challenges. 

  • The Road Ahead

It is up to the management thinkers of the 21st century to carry on with the journey. Although, the history of management thought is hardly a century old, many of the thoughts have their foundations in other fields of studies like sociology and psychology; this way, it shares common field with some of the more advanced and mature academic fields. The biggest contribution which the thoughts from the management discipline have made to other academic disciplines is the vast scope of interdisciplinary researches which it has brought to the forefront. Since the laboratory of management discipline is the organization, which is a reflection of the world of which it is a part and is easy to observe, management thoughts have their roots in inductive as well as deductive reasoning. The contributions which management thought has made to understand the organizations as a whole are not only valid for the organizations, but also for the society in general. With the passage of time, this contribution would only get stronger and thus would help in better understanding the world in which we live. Management thought has a long way to go, and it has started the journey with the initial help from great management thinkers, the contributions of whom have paved the way for continuing with the journey on the road ahead. 

End of Part Two.

Part 1 of the article can be viewed here

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