Modern Management Theory: a Conclusion

 Modern Management Theory:  a Conclusion 

In the previous chapters we have gone through the most important management theories in the last 100 years. The introduction of the Ford Assembly Line allowed previously expensive cars to be affordable to the every-day individual. The high production costs made owning a car a luxury. Mass production cut production costs to such a low level that any person from middle class could afford their transportation. Consider that Model T was in the beginning only available in black color. Standardizing production means as well less variety since all consumers get the same, achieving then scalability in the production process.  

Taylor brings about the Time and Motion study [1]. For the first time, the focus is on internal efficiency to boost productivity. He understood that since workers are paid on a daily basis without regards to their efficiency levels, there is no incentive for them to deliver more. The workers will then gang up to deliver the minimum levels of production, whereas the employers expect more than what they pay for. A balance must be achieved, but engaging the workers in the process and also offering an attractive compensation.  

Fayol on the other hand, the focus shifted to good management. You could say that the concept of Soft Skills [2] appeared. Management is not only about having technical competences, but also about knowing how to manage people. His introduced the 14 Principles of Management: division of work, authority, discipline, unity of command, unity of direction, subordination of individual interest to general interests, remuneration, centralization, scalar chain, order, equity, stability of tenure of personnel, initiative, spirit of cooperation. See how important the concept of good leadership is in order to ensure follow-through with these guidelines.  

Max Weber’s Bureaucratic Management also dwells on the concept of leadership by describing an ideal system where competences and abilities are favored over contacts, networking, blood-rights or birth-rights. By getting the best, most valuable people, organizations ensure themselves their own survival. Consider the job market as a pool of individuals that companies can take benefit from. If you don’t hire the best people, others will. Valuing, promoting them and increasing their benefits is also key to build a high-performing team.  

Mc Gregor’s Theory X & Theory Y focuses for the first time on people as the most valuable assets for an organization. Neither Theory X nor Y is good or bad, and none of them should be applied in pure form. It simply denotes a line towards situational leadership, applying different styles in different stages of a team building process. A vertical structure must be set in place in the beginning in order to delegate tasks and to show a concrete direction. An empowered style can be applied later on once the resources are self-sufficient. But I will get on to that in a later section. 

Human Resource Management introduces a whole new level by introducing an HR department. They are responsible for defining the job positions, recruiting, training and performance appraisals. They are also responsible for defining an attractive salary package, but also a bonus model. All of HR actions should be aimed at recruiting, but also at keeping the best, cleverest candidates. HRM introduces a concept that is excellent in theory, but does not really appeal in practice. The truth is that the HR department never really has too much weight in organizations, and their functions are usually absorbed by middle management. A shame, a sharp HRM strategy can work miracles if correctly applied.  

The General Systems Theory is not exclusively applied to Management but to all systems. Focusing on organizational systems, it introduces the concept that the performance of an individual department or team is not isolated but is part of a whole. Consider a department divided in different teams. Each team has their own allocated resources, based on budget. Increasing personnel or spending in one department would certainly mean decreasing it in another. A correct alignment between Directives, Middle Management and workers, as well as within different departments, is crucial to long term organizational success.   

Chaos Theory explains that the introduction of an individual, isolated “bug” in a system can lead to catastrophically unforeseen events. Even if statistically speaking it has no influence, minor changes can have a domino effect that can take a plan out of it’s course. Consider a leakage in a factory. This could spark a fire that blows up the installations. Now the company has to adjust their plan to deal with reparations and less capacity. If the factory was a vital, functioning part of the organization, the survival of the company itself could be at risk.  

The Toyota Production System changes the game once more, challenging the Ford Assembly Line and switching the gear from a push concept to a pull concept. The focus is mainly on inventory reduction, saving massive costs in the logistics department. It is for internal processes purposes, looking for the most efficient way of reorganizing processes. Even if it began in the automotive industry, the concept quickly spread towards other industries.  

Agile Methodology is mainly a Software Development Methodology, oriented to deliver software products in a better, more effective way. The work is delivered in chunks so that the customers can give their input. By delivering the software in batches, competences are built internally in the organization together with each batch. Backlogs are estimated in a list, where prioritization of features will be included in other releases. The loop is repeated over and over again until the final product is released to the market. 

Finally, Lean Methodology applies the effectiveness of the Toyota Just in Time giving it a market orientated focus. It involves a cultural change, with continuous improvement as a manner of identifying inefficiencies throughout the organization. The cycle of Build/Measure/Learn and consequent pivot is a fantastic way of guiding Start-ups is the right direction. Lean is the newest and most innovative management theory, and can take a business to the NeXT level if correctly applied.  

To conclude, we have now had a great overview of Managerial Theory in the last 100 years of human development. The point of this long exercise is to set the groundwork to understand the subject I will later come into. Leadership must not be static but dynamic. Understanding managerial theory helps us see what is really going on inside organizations. Even if clear rules are established from the top, this does not necessarily mean that employees will follow them. Motivation and the human factor play the most important role in an organization’s success. That is what the NeXT chapters will focus on. 

https://en.wikipedia.org/wiki/Time_and_motion_study
https://en.wikipedia.org/wiki/Soft_skills