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Modern theories of management


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8 main theories are presented here

Published in: Leadership & Management
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Modern theories of management

  2. 2.  Organization is a system consisting of four subsystems- task,structure,people and environment  Subsystems are interconnected and interdependent  Management regulates and modifies the system to optimize performance OPERRATIONAL APPROACH  Production – oriented field of management dedicated to improving efficiency and cutting waste
  3. 3. QUANTITATIVE APPROACH  A problem is expressed in the form of quantitative or mathematical model  Different variables in management can be quantified and expressed in the form of an equation  Management =decision making, organization=decision making unit CONTINGENCY THEORY  There is no universal or one best way to manage  Wide range of external and internal factors must be considered and the focus should be on the action that best fits for the situation.
  4. 4. THEORY Z  Theory Z has been called a sociological description of the humanistic organizations  “Theory Z is an approach to management based upon a combination of American and Japanese management philosophies”. Proponents of Theory Z suggest that it leads to improvements in organizational performance. TOTAL QUALITY MANAGEMENT APPROACH  Wide effort to improve quality of products and services  People and organizations mainly focus on quality given by Quality = results of work efforts total costs
  6. 6. LUDWIG VON BERTALANFFY IS RECOGNIZED AS THE FOUNDER OF GENERAL SYSTEM THEORY. SYSTEM: A system is a set of INTERRELATED but separate parts working towards a common purpose. TYPES OF SYSTEMS: 1)Open system. 2)Closed system.
  7. 7. KEY TERMS • SUBSYSTEM : parts of system that depends on each other. • Internal subsystem. • External subsystem. • SYNERGY : cooperation between subsystems. • SYSTEM BOUNDARY:separation b/n internal and external subsystems.
  8. 8. COMPONENTS OF A SYSTEM • Inputs • Transformation process • Outputs • Feedbacks • environment
  9. 9. • Subsystems have proper order and communication b/n them. • Decisions are based on impacts on various subsystems.
  11. 11. THREE FUNCTION SYSTEMS MODEL • Benchmarking • Leadership • Employee involvement • Process involvement • Customer focus
  12. 12. FEATURES OF SYSTEM APPROACH • Dynamic • Adaptive • Multilevel and multidimensional • Managers will have a good view • Gives importance to interdependence of different parts • Forecasts consequences and plans actions
  13. 13. Closeness to reality. The approach may be utilised by any of the other approaches. Complex when used in large organisations. Increased difficuilty for managers. ADVANTAGES DISADVANTAGES
  14. 14.  What is operational approach?  Systematic management of all processes to achieve world class performance by:  Efficient utilisation of tools  Optimisation of resources  Elimination of process wastes/inefficiencies
  15. 15.  By following the above three conditions, there is a continuous improvement and standardization in a process.
  16. 16.  CHARACTERISTICS: Draws together concepts, principles, techniques and knowledge from other fields and managerial approaches. The conceptual framework of management can be constructed on the basis of the analysis of management process and identification of management principles.
  17. 17.  ADVANTAGES: Increase in Productivity. Improvement in Quality. Potential savings. Simplification of Tasks.
  18. 18.  Operational Approach emphasises static conditions whereas the organizations have to function in dynamic conditions.  It claims universality or management principles while management differs from organization to organization and from level to level.
  19. 19.  Quantitative techniques are those statistical and programming techniques, which help decision makers solve many problems, especially those concerning business and industry  Quantitative techniques are those techniques that provide the decision makers with systematic and powerful means of analysis, based on quantitative data, for achieving predetermined goals
  20. 20.  1) Statistical Techniques  2) Programming Techniques
  21. 21.  It is a mathematical technique for optimum allocation of scarce or limited resources to several competing activities on the basis of given criterion of optimality, which can be either performance, ROI, cost, utility, time, distance etc.
  22. 22.  Formulate the problem  Convert all inequalities to equations  Plot the graph of all inequalities  Find out the feasilble region  Find out the corner points  Substitute the objective function  Arrive at the solution
  23. 23.  A special kind of optimization problem in which goods are transported from a set of sources to a set of destinations subject to the supply and demand constraints. The main objective is to minimize the total cost of transportation.
  24. 24.  A flow of customers from finite/infinite population towards the service facility forms a queue due to lack of capacity to serve them all at a time.
  25. 25. The decision making environment  Under certainity  Under uncertainity  Under risk
  26. 26.  Laplace Criterion  Maxmin Criterion  Minmax Criterion  Maximax Criterion  Minmin Criterion  Hurwicz Criterion
  27. 27.  Inventory is vital to the successful functioning of manufacturing and retailing organizations. They may be raw materials, work-in-progress, spare parts/consumables and finished goods.
  28. 28.  It involves developing a model of some real phenomenon and then performing experiments on the model evolved. It is descriptive in nature and not an optimizing model.
  29. 29.  Definition of the problem  Construction of an appropriate model  Experimentation with the model  Evaluation of the results of simulation
  30. 30. A project is a series of activities directed to the accomplishment of a desired objective.  PERT  CPM
  32. 32. Contingency approach states that there is “no one best way” to manage an organisation. It is also known as situational approach. “THE BEST WAY TO ORGANIZE DEPENDS ON THE NATURE OF THE ENVIRONMENT TO WHICH THE ORGANIZATION RELATES.” - William Richard Scott
  33. 33. In 1970s, it is recognized as a key to effective management. CONTRIBUTORS:  L.W. Lorsch  Joan Woodward  Burns  George Stalker  Paul R.Lawrence
  34. 34. Joan Woodward (1916-1971) – “Management and Technology”, 1958, ”Industrial Organization”, 1965 – Studied a large number of firms (100) in the South Essex area of England in the 1950s – Found that organizational form varied, and correlated with production technology – Concluded that there was not ”one best way” to organize – the nature of the production process would determine which form that would be most suitable.
  35. 35. Tom Burns (1913-2001) and G. M. Stalker – “The Management of Innovation” (1961) – Studied the introduction of electronics in Scottish industry – Described two ideal types of organization on each side of a continuum – the mechanistic and the organismic (organic) organization – The organization as a result of the simultaneous working of (at least) three different social systems: • Formal authority: aims, technology, relations with the environment • Cooperative systems of people with different aspirations •The political system – the competition and cooperation for power
  36. 36. Paul R. Lawrence (1922-2011) and Jay W. Lorsch (1932 ) – “Organization and Environment: Managing Differentiation and Integration” (1967) – Question: Why do people seek to build organizations? Answer: In order to find better solutions to the environmental problems faced by them. – Therefore: • It is people who have purposes, not organizations • People come together to coordinate their different activities into an organization structure • The organization’s effectiveness is judged from the extent to which the members’ needs are satisfied through the planned transactions with the environment – In order to cope with the environment, organizations develop units and formal structures suited to the particular environment(s) they operate in.
  37. 37. What you do “depends” on the “situation”. -internal contingency factors -external contingency factors
  38. 38. Internal Contingency Factors Purpose SizePeople Technology Structure
  39. 39. External Contingency Factors Socio-cultural Factors Legal /Political Factors Economic Factors Technological Factors
  40. 40. General Environment of Coca Cola Sociocultural •Concerns about health •Easier access to refrigeration •Baby boomers drinking less •Immigrants drink less •Concerns about recycling •Increased acceptance in China and India Government •Increased health standards for bottling •Stricter liability legislation Economic •Slow economic growth •Prospect of economic recovery Technological •New recycle friendly canning tech. •New promotional opportunities via the internet •Threat of substitute drinks Coca Cola
  41. 41. Instead of propagating universally applicable organisation-management principles, this theory tries to demonstrate that different circumstances require different organisational structures What works for one organisation may not work for the other. Managers need to understand the key contingencies that effect the management practice for a given situation.
  42. 42. EXAMPLE OF A SHOE MANUFACTURING COMPANY: A shoe manufacturing company is faced with the problem of decreasing profits; Solution can be: May establish a committee of sales and production personnel to coordinate the production and distribution of goods under the assumption that large inventories are responsible for the decline in profits - (Systems theory) By application of a contingency perspective: Would enable to examine the situation and to determine the cause of decreased profits before a new procedure or program is implemented.
  43. 43. Example of a super market manager: Problem: Customers Are complaining that queing lines and time for billing are high. Solution: Manager identifies that, 1)The waiting times and queue lengths are always changing. 2)So a flexible approach is required. Then he observes the customers and assings duty to the workers according to the changing situation.
  44. 44. Studies show that companies that operate in less structured environments are more successful with a flexible approach to management, while companies in a more stable environment do better with a more rigid and structured management style of operations. When the uncertainity of environment is high, an organic structure(more flexible one) is suitable and when uncertainity is low a mechanistic structure is suited.
  45. 45. Contingency theory is designed to provide the manager with the capabilities to examine numerous possible solutions to a problem. Adapting to changing circumstances- No two situations are absolutely identical, therefore each situation requires its own unique solution. To adopt this approach managers must sample all the past and present ideas, some refer this to the ‘smorgasbord approach’.
  46. 46.  The way you manage should change depending on the circumstances.  Sometimes a bureaucratic organization is most effective, sometimes a more loosely structured one; sometimes a more classical approach is best, sometimes a more modern one.  The most effective management style will vary depending on the type of organization, its size, its environment, and the particular situation/problem it faces at the time.
  47. 47. Limitations of Contingency Approach:  Difficulty in determining all relevant contingency factors and showing relationship between them may be complex.  It is totally practical approach without support of theoretical and conceptual frame work.  Sometimes manager finds difficulties in analyzing the situation and discovering appropriate management technique in absence of proper research and lack of proper understanding of the situation.
  48. 48.  Theory Z has been called a sociological description of the humanistic organizations  “Theory Z is an approach to management based upon a combination of American and Japanese management philosophies”. Proponents of Theory Z suggest that it leads to improvements in organizational performance.
  49. 49. American Organisations  Short-term employment  Individual decision making  Individual responsibility  Rapid evaluation & promotion  Explicit control mechanisms  Specialized career paths Japanese Organisations  Lifetime employment  Collective decision making  Collective responsibility  Slow evaluation & promotion  Implicit control mechanisms  Non-specialized career paths
  51. 51.  Type Z organizations generally make life- long commitments to their employees and expect loyalty in return, but Type Z organizations set the conditions to encourage this. This promotes stability in the organization and job security among employees.
  52. 52.  The type-z organisation emphasizes communication,collaboration,consensus in Decision making
  53. 53.  Type z organizations retain the emphasis on individual contributions that are characteristic of most american firms by recognizing individual achievements,albeit within the context of the wider group
  54. 54.  The type z organisation,conversely adopts the model of slow evolution and promotion
  55. 55.  The type z organization relies on informal methods of cotrol,but does measure performances through formal mechanisms. This is an attempt to combine elements of both the Type A and Type J organisations.
  56. 56.  The type z organization is characterized by concern of employees that goes beyond the workplace.This philosophy is more consistent with the japanese model than the U.S model
  57. 57.  IBM  Procter and Gamble  Hewlett and packard  Eastman kodak
  58. 58.  TOTAL QUALITY MANAGEMENT(TQM) is the integration of all functions and processes within an organization to achieve continuous improvement of the quality of goods and services.  The goal is customer satisfaction.
  59. 59.  Quality is defined as conformance to requirements, not goodness.  The system for achieving quality is prevention, not appraisal.  The performance standard is zero defects, not “That’s close enough”.  The measurement of quality is price of non conformance, not indexes.
  60. 60. Different people interpret quality differently. Few can define quality in measurable items that can be proved operationalized. When asked what differentiates their products of service The banker will answer “Service”. The health care worker will answer “Quality health care”. The hotel employee will answer “Customer satisfaction”.
  61. 61.  According to Phil Crosby, Quality is…..  An attitude: - zero defects - continuous improvement. A measurement: - price of Conformance, plus - price of Non Conformance (defects)
  62. 62.  A belief in employees ability to solve problems.  A belief that people doing the work are best able to improve it.  A belief that everyone is responsible for quality.
  63. 63. - 22,000 checks will be deducted from the wrong bank accounts in the next 60 minutes. - 20,000 incorrect drug prescriptions will be written in the next 12 months. - 12 babies will be given to the wrong parents each day.
  64. 64.  Visible, committed and knowledgeable.  A Missionary zeal.  Aggressive Targets.  Strong Drivers.  Communication of values.  Customers Contact.
  65. 65. • Systems viewpoint • Dynamic process of interaction • Multilevelled and multidimensional • Multimotivated • Probabilistic • Multidisciplinary • Descriptive • Multivariable • Adaptive
  66. 66. • Management is influenced by Internal and external environment. • Appropriate techniques are determined by situation and Environmental factors of an organization. • Thus the conclusion is that there cannot be any fixed universal principles of management and organizations. • The ancient approaches to management namely the scientific approach and the human relations thought can be described as the sources of the modern day management thought.
  67. 67.  While the scientific management theory focus on the efficiency of the production process and the motivation of the worker, the human relations thought emphasizes on the importance of behavioral elements in employee satisfaction and consequently the levels of satisfaction.  The combination of these two traditional models therefore covers the most important aspects of management albeit in a retracted form.  The modern approaches to management tend to build onto these provisions by providing meaningful insights that enable management practices to be relevant and more effective in the modern day.
  68. 68.  The conveyor belt production which is still common can also be traced to the scientific model.  It therefore must be concluded that modern approaches to management reinforce rather than repudiate the traditional approaches to management.
  69. 69. THANK YOU