Lecture-09

Contemporary Management

1. Management By Objectives:

Peter Ferdinand Drucker November 19, 1909 – November 11, 2005) was an Austrian-born
American management consultant, educator, and author, whose writings contributed to the
philosophical and practical foundations of the modern business corporation. He was also a leader
in the development of management education, he invented the concept known as management by
objectives, and he has been described as "the founder of modern management"

This method aims to identify and closely align organizational goals and subordinate objectives
throughout the organization. Ideally, employees get strong input to identify their own goals and
objectives. It includes extensive, ongoing tracking and feedback in the processes to reach
objectives. Similar to continuous improvement, many organizations already implement some
version of MBO, but probably not to the extent that experts in MBO would recognize as MBO in
the organizations.

In 1965, George S. Odiorne completed a textbook titled, Management by Objective. The fact
that the term "Management by Objective" has now become common nomenclature to company
executives around the country attests to the success of Odiorne's literary efforts.

In its briefest form, Odiorne's decision making system of management by objective contains the
following basic elements:

(1) Establish an objective before you begin;

(2) Collect and organize all of the pertinent facts;

(3) Identify the problem and its causes;

(4) Work out a solution and some options;

(5) Screen options through some decision criteria;

(6) Establish some security actions to enhance the probable success of the solution;

(7) Gain acceptance of the decision;

(8) Implement the decision; and

(9) Measure the results.

2. The Deming System of Profound Knowledge:

William Edwards Deming (October 14, 1900 – December 20, 1993) was an American engineer,
statistician, professor, author, lecturer, and management consultant. Deming is best known for
his work in Japan after WWII, particularly his work with the leaders of Japanese industry. That
work began in August 1950 at the Hakone Convention Center in Tokyo when Deming delivered
a seminal speech on what he called Statistical Product Quality Administration. Many in Japan
credit Deming as the inspiration for what has become known as the Japanese post-war economic
miracle of 1950 to 1960, when Japan rose from the ashes of war to become the second most
powerful economy in the world in less than a decade founded on the ideas Deming taught:[4]

1. Better design of products to improve service

2. Higher level of uniform product quality
3. Improvement of product testing in the workplace and in research centers
4. Greater sales through side [global] markets

Deming is best known in the United States for his 14 Points (Out of the Crisis, by Dr. W.
Edwards Deming, Preface) and his system of thought he called the System of Profound
Knowledge. The system comprises four components or "lenses" through which to view the world
simultaneously:

1. Appreciating a system
2. Understanding variation
3. Psychology
4. Epistemology, the theory of knowledge[5]

A. Deming philosophy synopsis

The philosophy of W. Edwards Deming has been summarized as follows:

Dr. W. Edwards Deming taught that by adopting appropriate principles of management,

organizations can increase quality and simultaneously reduce costs (by reducing waste, rework,
staff attrition and litigation while increasing customer loyalty). The key is to practice continual
improvement and think of manufacturing as a system, not as bits and pieces."[26]

In the 1970s, Deming's philosophy was summarized by some of his Japanese proponents with the
following 'a'-versus-'b' comparison:

(a) When people and organizations focus primarily on quality, defined by the following
ratio,
 quality tends to increase and costs fall over time.

(b) However, when people and organizations focus primarily on costs, costs tend to rise
and quality declines over time.

The Deming System of Profound Knowledge

Deming advocated that all managers need to have what he called a System of Profound
Knowledge, consisting of four parts:

1. Appreciation of a system: understanding the overall processes involving suppliers,

producers, and customers (or recipients) of goods and services (explained below);
2. Knowledge of variation: the range and causes of variation in quality, and use of statistical
sampling in measurements;
3. Theory of knowledge: the concepts explaining knowledge and the limits of what can be
known.
4. Knowledge of psychology: concepts of human nature.