Chapter 2 Emergence of MGT

Chapter 2:
Emergence and Development of

management Thoughts
Presented by: Alemayehu M.

GAMBY Medical and Business College
October 2017
01/17/2023 SMUC, MBA program 1

LEARNING OBJECTIVES
After completing this chapter, you should be able to:

• Describe some early management practices
• Explain the various theories in the classical approach.
• Discuss the development and uses of the behavioral
approach.
• Describe the quantitative approach to management.
• Explain the various theories in the contemporary
approach.

Introduction … (1)
• History is important because it can put current
activities in perspective.
• In this chapter, we’re going to take a trip back in
time to see how management has evolved as a
field of study.
• today’s managers are still using many elements of
the historical approaches to management.
• Knowledge of the past management history offers
insight in to how managerial theories and practice
has evolved.
Introduction …. (2)
• Management has been practiced a long time.

Organized endeavors directed by people responsible
for planning, organizing, leading, and controlling
activities have existed for thousands of years.
• Why study theory?

• Theory is a perspectives by which people make
sense of their world experiences
• Theory is a coherent group of assumptions to
explain relationships between observable facts

Introduction …..
• Management thought has been shaped over a

period of centuries by three major sets of
forces: Social, economical and political in
nature, and they continue to affect
management theory even today.
• Let’s look at some of the most interesting

examples human endeavors that demonstrate
the existence of mgt for centuries.

Major Approaches to Management
The figure shows the four major approaches to management theory: classical, behavioral, quantitative, and contemporary.
Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved
1. Early management
Practices

1. The construction of Egyptian pyramids
• The Egyptian pyramids and the Great Wall of China are proof that
projects of tremendous scope, employing tens of thousands of
people, were completed in ancient times.
• The construction of the Egyptian pyramids: It took more than
100,000 workers for 20 years to construct a single pyramid. It
took place on 13 hectares of land using 2,300,000 stones.
• Who told each worker what to do? Who ensured that there would
be enough stones at the site to keep workers busy? The answer is
managers.
• Someone had to plan what was to be done, organize people and
materials to do it, make sure those workers got the work done,
and impose some controls to ensure that everything was done as
planned.
2. Greece
• Greece - Exhibited a real skill and capacity for

management in the operation of trading
companies. They recognized the means to
maximize output through the use of uniform
methods and motion study.

3. Industrial Revolution
• industrial revolution started in the late 18th century when
machine power was substituted for human power
• it became more economical to manufacture goods in factories
rather than at home- mass production started.
• These large efficient factories needed someone to forecast
demand, ensure that enough material was on hand to make
products, assign tasks to people, direct daily activities, and so
forth.
• That “someone” was a manager: These managers would need
formal theories to guide them in running these large
organizations.
• It wasn’t until the early 1900s, however, that the first steps
toward developing such theories were taken.

4. Romans
• Romans - the ancient Romans also provided numerous illustrations of
effective management.
• Perhaps the most famous is the Emperor Diocletian's reorganization of his
empire.
• Assuming his position in A.D. 284, abandoned the old structure, in which
all provincial governors reported directly to him, he established more levels
in the hierarchy. He reorganized the Roman Empire as: into 100 provinces
with 13 dioceses and 4 major geographical areas. By doing so he ruled
Rome to its best time.
• The governors were pushed farther down the structure and, with the help
of other administrators; the emperor was able to more effectively manage
this vast empire.
• After he divided Rome as such, he appointed 3 people on the divisions and
the rest for himself - Delegation of authority.
5. Roman Catholic Church
• Roman Catholic Church - was the most successful formal

institution in the western civilization. Rome achieved
greater colonies using the Catholic Church.
• the contributions of Roman Catholic Church for the
development of management are on the areas of:
– Hierarchy of authority: there was a hierarchical structure from
Pope - Bishop - priest - laity.
– Specialization of activities: there was a training to be Pope,
Bishop, Priest and Laity.
– Use of staff managers
– Compulsory staff service
– Staff independence

6. Bible
• Bible - Exodus 18:13-26; Jethro, Moses', father in-law, advised
Moses that he was doing more than one man should and suggested
specific steps to relief him of his burden.
• He first recommended that 'ordinances and laws'' should be taught
to the people. ……. in modern terms, the origination needed a
statement of policies, rules and procedures.
• Second, he commended that leaders be "selected and assigned” to
be rulers to thousands, and rulers of hundreds, and rulers of fifties
and rulers of tens. That was recommending delegation of authority.
• Third point, that these rulers should administer all routine matters
and should “bring to Moses the important questions,” forms the
basis of a well known control procedure: the principle of
management by exception.

7. Ethiopia
• In Ethiopia,
– The Ethiopian Orthodox church… was the first
formal institution in the country…
– the construction of Axum obelisks, Castle of
Gondar, Rock Hewn Churches of Lalibela, the Wall
of Harrar etc. are good examples that demonstrate
the practice of modern management in ancient
times.

2. Pre- classical contributors
(Pioneer contributors)

Pioneer contributors
• A number of individuals in the pre-classical period

of the middle and late 1800s began to offer ideas
that laid the groundwork for broader inquiries
into the nature of management that followed.
• Among the principal pre-classical contributors are:
1. Robert Owen,
2. Charles Babbage
3. Adam Smith,

i. Robert Owen (1771 - 1858)
•was a British industrialist and owner-manager of several successful cotton mills in
Scotland.
•Problems at that period: poor working and living conditions for employees, child
workers were common and the standard working day was 13 hrs long. Workers were
treated in much the same terms as tools and machines.
•Owen was one of the first managers to recognize the importance of human resource
in an organization. As a result he was considered as ‘father of modern personnel
management.’
•He introduced in his organization the following:
• Reduce working hrs from 13 hrs to 10 and half hrs a day,
• Set a minimum hiring age (10 year) to protect children from the abuses of
employers,
• Provide meal, housing, and shopping facilities for employees,
• Improved working conditions in the factory
•He argued, "Improving the condition of employees would inevitability lead to
increased production and profits".
ii. Charles Babbage (1792 – 1871)
– English mathematician and invented the first

mathematical calculator
– Known as the “Father of the modern computer”
– Interested in work specialization and economies
of scale in manufacturing
– Developed modern profit-sharing plan with
bonuses for useful suggestions

iii. Adam Smith
• Smith made an important contribution to the development of management
by introducing the concept of division of labor or specialization in his book
‘The Wealth of Nations’ in 1976.
• He argued that specialization (that is, breaking down jobs into narrow and
repetitive tasks) could lead to increased efficiency and productivity. This is
because:
– Specialization increases the dexterity in every particular work person.
– Specialization saves the time lost in passing from one species of work to
another.
– Specialization helps to the invention of great number of machines, which
facilitates and bridge and enable to save labor.

Case
You are a management

consultant and is
required to recommend
ways to increase the low
productivity of XYZ’s
workers at production
processing department.
How to increase productivity?
Find ways to Find ways to Find ways to

increase the understand improve the
individuals
efficiency of the operation,
behavior, groups
individual and teams, to decision making
workers and the motivate them and and resource
whole effectively lead allocation
orgnisation them
How to increase productivity?
Find ways to Find ways to Find ways to

increase the understand improve the
efficiency of the individuals
operation,
individual workers behavior, groups
and the whole and teams, to decision making
orgnisation motivate them and and resource
effectively lead allocation
them
Classical Behavioral Quantitative

Management Perspectives

Management Management Management
Perspectives Perspectives Perspectives
Methods for Insights for moti- Techniques for
enhancing vating performance improving decision
and understanding making, resource
efficiency and
individual behavior, allocation, and
facilitating planning,
groups and teams, operations
organizing, and
and leadership
controlling
An Integrative Systems Approach Contingency Perspective
• Recognition of internal • Recognition of the situational
Framework of
interdependencies nature of management
Management • Recognition of • Response to particular
Perspectives environmental influences characteristics of situation

Universal efficiency and and understanding making, resource
Management facilitating planning, individual behavior, allocation, and
Perspectives organizing, and
controlling
groups and teams,
and leadership
operations
Effective and efficient management

3. Classical Management
Theories

Major Approaches to Management
The figure shows the four major approaches to management theory: classical, behavioral, quantitative, and contemporary.
Classical approach
• Although we’ve seen how management has been used in
organized efforts since early history, the formal study of
management didn’t begin until early in the twentieth
century.
• The first study of management, often called the classical
approach, emphasized on economic rationality of employees
and making organizations and workers as efficient as possible.
• Three major theories comprise the classical approach:
1. Scientific management theory (Frederick W. Taylor, Frank and
Lillian Gilbreth, Henry Gantt)
2. Administrative management theory (Henri Fayol)
3. Bureaucratic management theory (Max Weber)

3.1. Scientific Management Perspective
Fredrick Taylor Frank and Lillian Gilbreth
Henry Gantt Harrington Emerson

Scientific Management Theory
• Frederic W. Taylor was the first and major
contributor of scientific management. He has been
called “the father of scientific management".
• published the “Principles of Scientific Management”
in 1911 and modern management theory was born
• Taylor worked at the Midvale and Bethlehem Steel
Companies
• As was a mechanical engineer by profession

Cont’d…
• Problems he has observed:

– Employees used vastly different techniques to do
the same job;
– Soldiering - Worker’s output was only about one-
third of what was possible (workers’
inefficiencies). They deliberately working at a slow
pace.
– No work standards existed and workers were
placed in jobs with little or no concern for
matching their abilities and aptitudes with the
tasks they were required to do.
The remedy?
• Focused on increasing the efficiency of the individual
worker by implementing the following:
1. applied the scientific method to shop-floor jobs.
2. Introduced the “one best way” for such jobs to be done.
• Putting the right person on the job with the correct tools and equipment
• Having a standardized method of doing the job
• Providing an economic incentive to the worker
3. Proposed a Piece Rate System:
 set the “standard” for job
 Pay workers for meeting/exceeding standard
 Pay individual worker – not everyone, or group/department, or the
“job” = pay according to individual value to business

Taylor’s Scientific Management Principles
Principles
1. Develop a science for each element of an individual’s
work to replace the old rule-of-thumb method.
2. Scientifically select and then train, teach, and develop the
worker.
3. Heartily cooperate with the workers to ensure that all work
is done in
accordance with the principles of the science that has been
developed.
4. Divide work and responsibility almost equally between
management and workers. Management does all work for
which it is better suited than the workers.
Example
• Taylor’s experiences at Midvale led him to define clear guidelines for improving
production efficiency. He argued that these four principles of scientific management
would result in prosperity for both workers and managers. How did these scientific
principles really work? Let’s look at an example.
• Probably the best known example of Taylor’s scientific management efforts was the pig
iron experiment. Workers loaded “pigs” of iron (each weighing 92 lbs.) onto rail cars.
Their daily average output was 12.5 tons. However, Taylor believed that by scientifically
analyzing the job to determine the “one best way” to load pig iron, output could be
increased to 47 or 48 tons per day. After scientifically applying different combinations
of procedures, techniques, and tools, Taylor succeeded in getting that level of
productivity. How? By putting the right person on the job with the correct tools and
equipment, having the worker follow his instructions exactly, and motivating the
worker with an economic incentive of a significantly higher daily wage. Using similar
approaches for other jobs, Taylor was able to define the “one best way” for doing each
job. Overall, Taylor achieved consistent productivity improvements in the range of 200
percent or more. Based on his groundbreaking studies of manual work using scientific
principles, Taylor became known as the “father” of scientific management. His most
prominent followers were Frank and Lillian Gilbreth.

Frank and Lillian Gilbreth
(Husband and Wife) - Industrial engineers

Frank Focused on increasing worker
productivity through the reduction of
wasted motion.
Standardization of Materials
Procedures to perform the job
Result- Increase output by 200%

Lillian Industrial psychology + Personnel mgt
Both “Cheaper by the Dozen”

Henry Gantt
• Developed
techniques, including
the Gantt chart, to
improve working
efficiency through
planning/scheduling
Henry Gantt…..

• Developed by Henry
Gantt to help
industrial age
managers plan for
mass production
• Utilized to coordinate

WWI shipbuilding
• Visual display used
to schedule based on
time
Henry Gantt – A scheduling Devise
Completed Week 1 Week 2 Week 3 Week 4
Planned 1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 24 25 26
1. Design
2. Purchase Parts
3. Fabricate Bodies
4. Fabricate Frames
5. Build Drive Trains
6. Assemble Carts
7. Test Carts
How today’s managers use scientific
management?
• Many of the guidelines and techniques that Taylor
and the Gilbreths devised for improving
production efficiency are still used in organizations
today. When managers analyze the basic work
tasks that must be performed, use time-and-
motion study to eliminate wasted motions, hire
the best-qualified workers for a job, or design
incentive systems based on output, they’re using
the principles of scientific management.

3.2. Administrative Management theory
• Administrative management theory focused more
on what managers do and what constituted good
management practice.
• Focuses on managing the total organization
• While scientific management was concerned with
first-line managers (shop level) and the scientific
method, administrative management theory’s
attention was directed at the activities of all
managers.
• Administrative theory (some times called functional
or process approach) was developed by Henry Fayol.
• Fayol- French industrailist

Cont’d….
• Fayol believed that management activities at the
upper levels are more significant than other levels.
• Fayol identified six basic activities of an organization:
1. Technical (production, manufacturing),
2. commercial (buying and selling),
3. financial,
4. accounting,
5. security (protecting property and personnel), and
6. administrative or managerial (what it includes….??).

Cont’d…
• The administration /managerial activities include (5

functions of management):
– Planning
– Organizing
– Commanding
– Coordinating
– Controlling
• Identified 14 principles of management -
fundamental rules of management that could be
applied to all organizational situations and taught in
schools. These principles are:
Fayol’s 14 principles of management
1. Division of Work. Specialization increases output by making employees
more efficient.
2. Authority and Responsibility. Managers must be able to give orders, and
authority gives them this right.
3. Discipline. Employees must obey and respect the rules that govern the
organization.
4. Unity of command. Every employee should receive orders from only one
superior.
5. Unity of direction. The organization should have a single plan of action
to guide managers and workers.
6. Subordination of individual interests to the general interest. The
interests of any one employee or group of employees should not take
precedence over the interests of the organization as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.

Principles …..
8. Centralization. This term refers to the degree to which subordinates are

involved in decision making.
9. Scalar chain. The line of authority from top management to the lowest
ranks is the scalar chain.
10. Order. People and materials should be in the right place at the right
time.
11.Equity. Managers should be kind and fair to their subordinates and
impartial treatment of all employees.
12.Stability of tenure of personnel. Long-term employment is important
for the development of skills that improve the organization’s
performance.
13.Initiative. Employees who are allowed to originate and carry out plans
will exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity
within the organization.

How today’s managers use administrative
theory?
• Several of our current management ideas and
practices can be directly traced to the contributions
of administrative management theory. For instance,
the functional view of the manager’s job can be
attributed to the 14 principles that serve as a frame
of reference from which many current management
concepts—such as managerial authority, centralized
decision making, reporting to only one boss, and so
forth—have evolved.

3.3. Bureaucratic management theory
• Developed by Max Weber (1864 – 1920)

• was a German sociologist who studied organizations.
• Father of Modern Sociology
• Most logical and rational structure for large
organizations
• he developed a theory of authority structures and
relations based on an ideal type of organization he
called a bureaucracy—a form of organization
characterized by division of labor, a clearly defined
hierarchy, detailed rules and regulations, and
impersonal relationships

Cont’d…
• Weber recognized that this “ideal bureaucracy” didn’t
exist in reality. Instead he intended it as a basis for
theorizing about how work could be done in large groups.
His theory became the structural design for many of
today’s large organizations.
• Bureaucracy, as described by Weber, is a lot like scientific
management in its ideology. Both emphasized rationality,
predictability, impersonality, technical competence, and
authoritarianism.
• Although Weber’s ideas were less practical than Taylor’s,
the fact that his “ideal type” still describes many
contemporary organizations attests to their importance.

Weber’s Principles
of Bureaucracy

Weber’s Principles of Bureaucracy
1) A manager’s formal authority derives from the

position he holds in the organization.
2) People should occupy positions because of their
performance, not because of their social
standing or personal contacts.
3) The extent of each position’s formal authority
and task responsibilities and it’s relationship to
other positions should be clearly specified.
4) Authority can be exercised effectively when
positions are arranged hierarchically, so
employees know whom to report to and who
reports to them.
01/17/2023 SMUC, MBA program 2-48
Weber’s Principles of Bureaucracy…….
5) Managers must create

a well-defined system
of rules, standard
operating procedures,
and norms so they
can effectively
control behavior .
01/17/2023 SMUC, MBA program 2-49

Its application today…
• Weber’s bureaucracy was an attempt to formulate an ideal
prototype for organizations. Although many characteristics of
Weber’s bureaucracy are still evident in large organizations,
his model isn’t as popular today as it was in the 20 th century.
• Many managers feel that a bureaucratic structure hinders
individual employees’ creativity and limits an organization’s
ability to respond quickly to an increasingly dynamic
environment.
• However, even in flexible organizations of creative
professionals—such as Microsoft, Samsung, General Electric,
or Cisco Systems—some bureaucratic mechanisms are
necessary to ensure that resources are used efficiently and
effectively.
Discussion Questions
• How the classical theories can be applied

today?
• What are the contribution and limitations of
the classical theories?

How classical management theories increase
productivity?
• Scientific Management
 Increasing the
efficiency of the
individual worker
• Administrative &
bureaucratic Management
 Focuses on managing
the total organization
Contribution of classical approach
• The growth of management as an important
element of organized society having principles
that can be learned and practiced.. Field of study
• The identification of functions and process of
management
• Many management techniques used today
(motion and time study, work simplification,
incentive system, production scheduling,
personnel testing and budgeting …) are derived
from the classical approach
Limitation of classical approach
• The approach is too simplistic for today’s

complex organizations and dynamic environment
• The approach regarded the human resources as
an inert object (instrument).
• concentrated on internal aspects management as
work measurement, efficiency and effective
organization structure. It disregarded the
influence of external environment on internal
organization’s performance.

4. Neo Classical Theories

4.1. The Behavioral Management
Perspective
• Placed emphasis on
individual attitudes and
behaviors and on group
processes and recognized
the importance of
behavioral processes in
the work place.
Behavioral approach ….
• Managers get things done by working with people. This explains
why some writers have chosen to look at management by
focusing on the organization’s people.
• The field of study that researches the actions (behavior) of people
at work is called organizational behavior (OB). Much of what
managers do today when managing people -motivating, leading,
building trust, working with a team, managing conflict, and so
forth—has come out of OB research.
• Proponents of this theory or approach are:
– Elton Mayo
– Abraham Maslow
– Douglas McGregor and so on

Hawthorne Studies
• Elton Mayo and his associates conducted their
studies in the Hawthorne plant of the western
electrical company, U.S.A., between 1927 and
1932.
• The Hawthorne experiment consists of four
parts:
1. Illumination Experiment
2. Relay Assembly Test Room Experiment
3. Interviewing Program
4. Bank Wiring Test Room Experiment
Phase 1: Illumination Studies
• The experiment: Measured Light Intensity vs. Worker
Output
• Process: The intensity of light varied
• Result :
– Higher worker productivity and satisfaction at all
light levels
• Conclusions:
– Light intensity has no conclusive effect on output
– Productivity has a psychological component
• Concept of “Hawthorne Effect” was created

Phase 2: Relay Assembly Test Experiments
• The experiment: a small homogeneous work-group of six girls, who
were friendly to each other, was constituted and were asked to work
in a very informal atmosphere under the supervision of a researcher.
• Manipulated factors of production to measure effect on output were:
– Pay Incentives
– Length of Work Day & Work Week
– Use of Rest Periods
– Company Sponsored Meals
• Results:
– Higher output and greater employee satisfaction
• Conclusions:
– Positive effects even with negative influences – workers’ output will
increase as a response to attention
– socio-psychological factors such as feeling of being important,
recognition, attention, participation, cohesive work-group, and non-
directive supervision held the key for higher productivity.
Phase 3: Plant Interview Program
• Objective: The objective of this program was to make a
systematic study of the employees’ attitudes which would
reveal the meaning which their “working situation” has for
them.
• The Process: large number of workers interviewed with regard
to their opinions on work, working conditions and supervision.
• Result:
– Remarkable positive employee perceptions
• Conclusions:
– New Supervisory Style improved worker morale
– The findings confirmed the importance of social factors at
work in the total work environment.

Phase 4: Bank Wiring Observation Group
• The experiment was conducted to study a group of 14 workers under conditions
which were as close as possible to normal.
• The process:
– Limited changes to work conditions
– Segregated work area
– No Management Visits
– Supervision would remain the same
– Observer would record data only – no interaction with workers
• Result:
– No appreciable changes in output
• Conclusions:
– Group dictated production standards - Systemic Soldiering
– Work Group protection from management changes.
– Each individual was restricting output.
– The group had its own “unofficial” standards of performance.
– Individual output remained fairly constant over a period of time.
– Informal groups play an important role in the working of an organization.
The Reality
• Groups were not selected objectively
• Workers replaced during experiment for poor
performance
• One Italian member was working harder and above
average to care for her family.

Criticisms
“Hawthorne effect is simply the result of ‘capitalist
bias’ among modern industrial psychologists.”
- American Psychologist Magazine
“Woman liked attention and interpreted experimenter

as the ‘boss’”
- Jonathan Freedman
“A distinguished industrial psychologist”

- H. Mcllvaine Parson
Importance of the study
• Although critics attacked the research procedures, analyses of
findings, and conclusions, what is important is that they
stimulated an interest in human behavior in organizations.
• Improved management
“…But Professor Mayo’s work also helped establish field

based empirical research as the primary research Methodology
at HBS.”
- Mary Lee Kennedy
• These studies changed the landscape of management
– Taylor's engineering approach improved into a social science
approach.
Contributions of the Hawthorne Experiment:
• According to them, behavioral science methods have many areas of application in
management. The important features of the Hawthorne Experiment are:-
• A business organization is basically a social system. It is not just a techno-economic system.
• The employer can be motivated by psychological and social wants because his behavior is
also influenced by feelings, emotions and attitudes. Thus economic incentives are not the
only method to motivate people.
• Management must learn to develop co-operative attitudes and not rely merely on
command.
• Participation becomes an important instrument in human relations movement. In order to
achieve participation, effective two-way communication network is essential.
• Productivity is linked with employee satisfaction in any business organization. Therefore
management must take greater interest in employee satisfaction.
• Group psychology plays an important role in any business organization. We must therefore
rely more on informal group effort.
• The neo-classical theory emphasizes that man is a living machine and he is far more
important than the inanimate machine. Hence, the key to higher productivity lies in
employee morale. High morale results in higher output.

How today’s managers use the behavioral approach?
• The behavioral approach has largely shaped how

today’s organizations are managed. From the way
that managers design jobs to the way that they work
with employee teams to the way that they
communicate, we see elements of the behavioral
approach. Much of what the early OB advocates
proposed and the conclusions from the Hawthorne
studies have provided the foundation for our current
theories of motivation, leadership, group behavior
and development, and numerous other behavioral
approaches.
5. Quantitative approach
• This approach also is known as management science.
• The quantitative approach evolved from
mathematical and statistical solutions developed for
military problems during WW II.
• Then after, many of these techniques were applied to
businesses.
• Focuses on improving managerial decision making by
applying:
• Statistics, optimization models, information models, and
computer simulations

What exactly does the quantitative approach do?
• It involves applying statistics, optimization models, information
models, computer simulations, and other quantitative
techniques to management activities. For instance:
– Linear programming, for instance, is a technique that managers use
to improve resource allocation decisions.
– Work scheduling can be more efficient as a result of critical-path
scheduling analysis.
– The EOQ model helps managers determine optimum inventory
levels.
• Each of these is an example of quantitative techniques being
applied to improve managerial decision making.
• Another area where quantitative techniques are used
frequently is in total quality management.

How today’s managers use the quantitative
approach?
• The quantitative approach contributes directly to
management decision making in the areas of
planning and control. For instance, when
managers make budgeting, queuing, scheduling,
quality control, and similar decisions, they typically
rely on quantitative techniques.
• Specialized software has made the use of these
techniques less intimidating for managers,
although many still feel anxious about using them.

6. Modern/contemporary
approaches to Management

• Are the three management
perspectives contradictory
or complimentary?
Integrating Perspectives for Managers
• A complete understanding of
management requires an
appreciation of, classical, behavioral,
and quantitative approaches.
• The systems perspectives and
• Contingency perspectives
An Integrative Framework of Management Perspectives
Systems Approach Contingency Perspective

• Recognition of internal • Recognition of the situational
interdependencies nature of management
• Recognition of • Response to particular
environmental influences characteristics of situation

efficiency and and understanding making, resource
facilitating planning, individual behavior, allocation, and
organizing, and groups and teams, operations
controlling and leadership
Effective and efficient management

Contemporary approaches
• As we’ve seen, many elements of the earlier
approaches to management theory continue to
influence how managers manage. Most of these earlier
approaches focused on managers’ concerns inside the
organization.
• Starting in the 1960s, management researchers began
to look at what was happening in the external
environment outside the boundaries of the
organization.
• Two contemporary management perspectives - systems
and contingency - are part of this approach.
5.1. Systems theory
• Systems theory is a basic theory in the physical sciences, but had
never been applied to organized human efforts until the 1960s.
• System: is a collection of parts operating interdependently to
achieve a common purpose.
• A system is a set of interrelated and interdependent parts arranged
in a manner that produces a unified whole.
• The two basic types of systems are closed and open.
 Closed systems are not influenced by and do not interact with
their environment.
 open systems are influenced by and do interact with their
environment.
• Today, when we describe organizations as systems, we mean open
systems

Components of a system
• An organization takes in inputs (resources)
from the environment and transforms or
processes these resources into outputs that
are distributed into the environment. The
organization is “open” to and interacts with its
environment.

The Systems Perspective of Organizations
Inputs from the

Transformation Outputs into
Process: the environment:
environment: • technology, • products/services,
• material,
• operating • profits/losses,
• Human, systems, • employee
• financial, and • administrative behaviors, and
• information • systems, and • Information
inputs. • control systems outputs
Feedback
How does the systems approach contribute to our
understanding of management?
• organization are made up of “interdependent

factors, including individuals, groups, attitudes,
motives, formal structure, interactions, goals,
status, and authority.”
• What this means is that as managers
coordinate work activities in the various parts
of the organization, they ensure that all these
parts are working together so the
organization’s goals can be achieved.
Systems approach…
• In addition, the systems approach implies that decisions

and actions in one organizational area will affect other
areas. For example, if the purchasing department doesn’t
acquire the right quantity and quality of inputs, the
production department won’t be able to do its job.
• Finally, the systems approach recognizes that
organizations are not self contained. They rely on their
environment for essential inputs and as outlets to absorb
their outputs. No organization can survive for long if it
ignores government regulations, supplier relations, or
the varied external constituencies upon which it
depends.
Characteristics of an open system
1. Entropy - refers to the tendency of systems to decay over time. In
contrast, negative entropy is the ability of open systems to bring in
new energy in the form of inputs and feedback from the environment
in order to delay or arrest entropy, the decaying process.
2. Differentiation - is the tendency of open systems to become more
complex. The increased complexity usually stems from the addition
of specialized units to handle particularly troublesome or challenging
parts of an environment.
3. Synergy - "the whole is greater than the sum of its parts.”
4. Steady state - the balance to be maintained between inputs flowing
in from the external environment and the corresponding outputs
returning to it. An organization in steady state is not static, but in
dynamic form of equilibrium.

How relevant is the systems approach to
management?
• Quite relevant. Consider, for example, a shift
manager at a Starbucks restaurant who must
coordinate the work of employees filling
customer orders at the front counter and the
drive-through windows, direct the delivery and
unloading of food supplies, and address any
customer concerns that come up. This manager
“manages” all parts of the “system” so that the
restaurant meets its daily sales goals.
5.2. Contingency theory
• The early management theorists came up with management
principles that they generally assumed to be universally
applicable. .. But later research found exceptions to many of these
principles. For example, division of labor is valuable and widely
used, but jobs can become too specialized. Bureaucracy is desirable
in many situations, but in other circumstances, other structural
designs are more effective.
• Management is not (and cannot be) based on simplistic principles
to be applied in all situations. Different and changing situations
require managers to use different approaches and techniques.
• The contingency approach (sometimes called the situational
approach) says that organizations are different, face different
situations (contingencies), and require different ways of managing.

Contingency ….
• A good way to describe contingency is “if, then.” If

this is the way my situation is, then this is the best
way for me to manage in this situation. It’s
intuitively logical because organizations and even
units within the same organization differ—in size,
goals, work activities, and the like.
• The primary value of the contingency approach is
that it stresses there are no simplistic or universal
rules for managers to follow.
• the common contingency variables are given below.

Regular contingency variables
1. Organization Size. As size increases, so do the problems of

coordination.
2. Routineness of Task Technology. To achieve its purpose, an
organization uses technology. Routine technologies require
organizational structures, leadership styles, and control systems that
differ from those required by customized or non-routine technologies.
3. Environmental Uncertainty. The degree of uncertainty caused by
environmental changes influences the management process. What
works best in a stable and predictable environment may be totally
inappropriate in a rapidly changing and unpredictable environment.
4. Individual Differences. Individuals differ in terms of their desire for
growth, autonomy, tolerance of ambiguity, and expectations. These and
other individual differences are particularly important when managers
select motivation techniques, leadership styles, and job designs.

End of chapter 2
…….. next class

chapter 3 Planning

Chapter 2 Emergence of MGT

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Chapter 2 Emergence of MGT

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Chapter 2:

Emergence and Development of

Presented by: Alemayehu M.

01/17/2023 SMUC, MBA program 1

After completing this chapter, you should be able to:

01/17/2023 SMUC, MBA program 2

• Management has been practiced a long time.

• Why study theory?

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• Management thought has been shaped over a

• Let’s look at some of the most interesting

01/17/2023 SMUC, MBA program 5

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• Greece - Exhibited a real skill and capacity for

01/17/2023 SMUC, MBA program 9

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• Roman Catholic Church - was the most successful formal

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• A number of individuals in the pre-classical period

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– English mathematician and invented the first

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You are a management

Find ways to Find ways to Find ways to

Find ways to Find ways to Find ways to

Classical Behavioral Quantitative

Classical Behavioral Quantitative

Classical Behavioral Quantitative

Effective and efficient management

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Fredrick Taylor Frank and Lillian Gilbreth

Henry Gantt Harrington Emerson

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• Problems he has observed:

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(Husband and Wife) - Industrial engineers

Both “Cheaper by the Dozen”

Completed Week 1 Week 2 Week 3 Week 4

5. Build Drive Trains

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• The administration /managerial activities include (5

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8. Centralization. This term refers to the degree to which subordinates are

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• Developed by Max Weber (1864 – 1920)

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1) A manager’s formal authority derives from the

5) Managers must create

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• How the classical theories can be applied

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• The approach is too simplistic for today’s