Chapter 2: The Management Movement Section 2.1: The Evolution of Management.

Chapter 2:The Management Movement

Section 2.1:

The Evolution of Management

The Industrial Revolution

• Began in the United States in 1860– Just before the Civil War

• Period during which a country develops an industrial economy

• Before the Industrial Revolution, economy based on agriculture

• By the late 1800s, economy depended on industries such as oil, steel, railroads, and manufactured goods

Causes of the Industrial Revolution

• Many people left their farms to work in factories– Professional managers supervised their work

• Changes in technology, communication, and transportation– Telegraph and cable lines extended across

the U.S. after the Civil War– Railroad lines, canals, roads, steamships

Captains of Industry

• Powerful businesspeople who created enormous business empires dominated and shaped the U.S. economy

John D. Rockefeller (Oil)James B. Duke (tobacco)

Andrew Carnegie (steel)J. P. Morgan (banking)Cornelius Vanderbilt

(steamships & railroads)

Creation of Monopolies

• The captains of industry often pursued profit and self-interest above all else– Drove competitors out of business– Created giant companies that maintained monopolies

in their industries

• Monopoly– Occurs when one party maintains total control over a

type of industry– Trust: giant industrial monopoly– By 1879, Rockefeller controlled >90% of the country’s

refining capacity and pipelines

The Break-Up of Trusts

• People became worried about the concentration of wealth in the hands of a only a few

• In response, the government began regulating business

Cornelius Vanderbilt

The Break-Up of Trusts

• The Interstate Commerce Act, 1887– The railroads gave rebates to some

customers but not others– This act forced railroads to publish their rates

and forbade them to change rates without notifying the public

– Established the Interstate Commerce Commission (ICC) to supervise the railroads

The Break-Up of Trusts

• The Sherman Act, 1890– Made it illegal for companies to create

monopolies– Intended to restore competition– Example

• Standard Oil Company was broken into smaller companies so that other oil companies could compete with the former giant

• John D. Rockefeller

New Challenges for Management

• When most Americans worked on farms, sophisticated management techniques were not necessary

• By the end of the nineteenth century, giant companies employed thousands of people and distributed products all over the country– Workers performed tasks that needed to be

coordinated– These changes demanded new ideas about how to

manage people working in large corporations

Frederick W. Taylor and Scientific Management

• Wanted to find ways to motivate workers to work harder

• To increase efficiency, he tried to figure “one best way” to perform a particular task– Used a stopwatch to determine which work

method was most efficient– These time and motion studies lead to

scientific management principles

Frederick W. Taylor and Scientific Management

• Scientific management seeks to increase productivity and make work easier by carefully studying work procedures and determining the best methods for performing particular tasks

Frederick W. Taylor and Scientific Management

1. Employers should gather, classify, and tabulate data in order to determine the “one best way” of performing a task or series of tasks.

2. Employers should study worker strengths and weaknesses and match workers to jobs. Employers should also train employees in order to improve their performance.

3. The principles of scientific management should be explained to workers.

4. Management and workers should be interdependent so that they cooperate.

Frederick W. Taylor and Scientific Management

• Companies today continue to use the principles of scientific management– Marriott Corporation

• Customer satisfaction

The Hawthorne Studies of Productivity

• Researchers began to look at the relationship between working conditions and productivity

• Series of experiments at the Hawthorne plant of Western Electric in Cicero, IL– Lowered the lighting expecting productivity to

fall– What happened?

The Hawthorne Studies of Productivity

• Baffled by results, a team of psychologists from Harvard University were called upon

• Over five years, hundreds of experiments were conducted at the plant– Different wage payments– Rest periods– Work hours

• What were the results?

The Hawthorne Studies of Productivity

• Researchers concluded that productivity rose because workers worked harder when they received attention

• Hawthorne effect– Change of any kind increases productivity

• Factors other than the physical environment affected worker productivity– Psychological and social conditions, effective

supervision

Abraham H. Maslow and the Hierarchy of Needs

• According to Maslow– All people have five basic types of needs– People fulfill lower-level needs before seeking

to fulfill higher-level needs• One set of needs must be met before another is

sought• “Hierarchy of needs” is his grouping and ordering

of physical, security, social, status, and self-actualization needs

Maslow’s Hierarchy of Needs

Applying Maslow’s Theory to Management

• At the lowest level, workers are motivated by basic needs– Wages or salary, physical conditions

• Safety or security needs– Providing insurance, retirement benefits, job

security– Safe from physical, psychological, or financial

harm

Applying Maslow’s Theory to Management

• Social needs– Provide a work environment in which

colleagues interact• Company lunch rooms, company retreats

• Status needs– Provide workers with signs of recognition that

are visible to others• Job titles, private offices, designated parking

spaces, awards, promotions

Applying Maslow’s Theory to Management

• Self-fulfillment needs– Provide employees with opportunities to be

creative at work• Include employees in decision making

• Example– ITT’s Ring of Quality Control