The History of Management

Learning Objectives
The purpose of this chapter is to:
 1) Give you an overview of the evolution of management thought and theory.
 2) Provide an understanding of management in the context of the modern-
day world in which we reside.
The History of Management
The concept of management has been around for thousands of years. According to
Pindur, Rogers, and Kim (1995), elemental approaches to management go back at
least 3000 years before the birth of Christ, a time in which records of business
dealings were first recorded by Middle Eastern priests. Socrates, around 400 BC,
stated that management was a competency distinctly separate from possessing
technical skills and knowledge (Higgins, 1991). The Romans, famous for their
legions of warriors led by Centurions, provided accountability through the hierarchy
of authority. The Roman Catholic Church was organized along the lines of specific
territories, a chain of command, and job descriptions. During the Middle Ages, a
1,000 year period roughly from 476 AD through 1450 AD, guilds, a collection of
artisans and merchants provided goods, made by hand, ranging from bread to
armor and swords for the Crusades. A hierarchy of control and power, similar to that
of the Catholic Church, existed in which authority rested with the masters and
trickled down to the journeymen and apprentices. These craftsmen were, in
essence, small businesses producing products with varying degrees of quality, low
rates of productivity, and little need for managerial control beyond that of the owner
or master artisan.
The Industrial Revolution, a time from the late 1700s through the 1800s, was a
period of great upheaval and massive change in the way people lived and worked.
Before this time, most people made their living farming or working and resided in
rural communities. With the invention of the steam engine, numerous innovations
occurred, including the automated movement of coal from underground mines,
powering factories that now mass-produced goods previously made by hand, and
railroad locomotives that could move products and materials across nations in a
timely and efficient manner. Factories needed workers who, in turn, required
direction and organization. As these facilities became more substantial and
productive, the need for managing and coordination became an essential factor.
Think of Henry Ford, the man who developed a moving assembly line to produce his
automobiles. In the early 1900s, cars were put together by craftsmen who would
modify components to fit their product. With the advent of standardized parts in
1908, followed by Ford’s revolutionary assembly line introduced in 1913, the time
required to build a Model T fell from days to just a few hours (Klaess, 2020). From a
managerial standpoint, skilled craftsmen were no longer necessary to build
automobiles. The use of lower-cost labor and the increased production yielded by
moving production lines called for the need to guide and manage these massive
operations (Wilson, 2015). To take advantage of new technologies, a different
approach to organizational structure and management was required.

The Scientific Era – Measuring Human Capital

With the emergence of new technologies came demands for increased productivity
and efficiency. The desire to understand how to best conduct business centered on
the idea of work processes. That is, managers wanted to study how the work was
performed and the impact on productivity. The idea was to optimize the way the
work was done. One of the chief architects of measuring human output was
Frederick Taylor. Taylor felt that increasing efficiency and reducing costs were the
primary objectives of management. Taylor’s theories centered on a formula that
calculated the number of units produced in a specific time frame (DiFranceso and
Berman, 2000). Taylor conducted time studies to determine how many units could
be produced by a worker in so many minutes. He used a stopwatch, weight
measurement scale, and tape measure to compute how far materials moved and
how many steps workers undertook in the completion of their tasks (Wren and
Bedeian, 2009). Examine the image below – one can imagine Frederick Taylor
standing nearby, measuring just how many steps were required by each worker to
hoist a sheet of metal from the pile, walk it to the machine, perform the task, and
repeat, countless times a day. Beyond Taylor, other management theorists
including Frank and Lilian Gilbreth, Harrington Emerson, and others expanded the
concept of management reasoning with the goal of efficiency and consistency, all in
the name of optimizing output. It made little difference whether the organization
manufactured automobiles, mined coal, or made steel, the most efficient use of
labor to maximize productivity was the goal.
The necessity to manage not just worker output but to link the entire organization
toward a common objective began to emerge. Management, out of necessity, had
to organize multiple complex processes for increasingly large industries. Henri
Fayol, a Frenchman, is credited with developing the management concepts of
planning, organizing, coordination, command, and control (Fayol, 1949), which were
the precursors of today’s four basic management principles of planning, organizing,
leading, and controlling.

Employees and the Organization

With the increased demand for production brought about by scientific
measurement, conflict between labor and management was inevitable. The
personnel department, forerunner of today’s human resources department,
emerged as a method to slow down the demand for unions, initiate training
programs to reduce employee turnover, and to acknowledge workers’ needs beyond
the factory floor. The idea that to increase productivity, management should factor
the needs of their employees by developing work that was interesting and
rewarding burst on the scene (Nixon, 2003) and began to be part of management
thinking. Numerous management theorists were starting to consider the human
factor. Two giants credited with moving management thought in the direction of
understanding worker needs were Douglas McGregor and Frederick Herzberg.
McGregor’s Theory X factor was management’s assumption that workers disliked
work, were lazy, lacked self-motivation, and therefore had to be persuaded by
threats, punishment, or intimidation to exert the appropriate effort. His Theory Y
factor was the opposite. McGregor felt that it was management’s job to develop
work that gave the employees a feeling of self-actualization and worth. He argued
that with more enlightened management practices, including providing clear goals
to the employees and giving them the freedom to achieve those goals, the
organization’s objectives and those of the employees could simultaneously be
achieved (Koplelman, Prottas, & Davis, 2008).
Frederick Herzberg added considerably to management thinking on employee
behavior with his theory of worker motivation. Herzberg contended that most
management driven motivational efforts, including increased wages, better
benefits, and more vacation time, ultimately failed because while they may reduce
certain factors of job dissatisfaction (the things workers disliked about their jobs),
they did not increase job satisfaction. Herzberg felt that these were two distinctly
different management problems. Job satisfaction flowed from a sense of
achievement, the work itself, a feeling of accomplishment, a chance for growth, and
additional responsibility (Herzberg, 1968). One enduring outcome of Herzberg’s
work was the idea that management could have a positive influence on employee
job satisfaction, which, in turn, helped to achieve the organization’s goals and
objectives.
The concept behind McGregor, Herzberg, and a host of other management theorists
was to achieve managerial effectiveness by utilizing people more effectively.
Previous management theories regarding employee motivation (thought to be
directly correlated to increased productivity) emphasized control, specialized jobs,
and gave little thought to employees’ intrinsic needs. Insights that considered the
human factor by utilizing theories from psychology now became part of
management thinking. Organizational changes suggested by management thinkers
who saw a direct connection between improved work design, self-actualization, and
challenging work began to take hold in more enlightened management theory.
The Modern Era
Koontz and O’Donnell (1955) defined management as “the function of getting things
done through others (p. 3). One commanding figure stood above all others and is
considered the father of modern management (Edersheim, (2007). That individual
was Peter Drucker. Drucker, an author, educator, and management consultant is
widely credited with developing the concept of Managing By Objective or MBO
(Wren & Bedeian, 2009). Management by Objective is the process of defining
specific objectives necessary to achieve the organization’s goals. The beauty of the
MBO concept was that it provided employees a clear view of their organization’s
objectives and defined their individual responsibilities. For example, let’s examine a
company’s sales department. One of the firm’s organizational goals might be to
grow sales (sometimes referred to as revenue) by 5% the next fiscal year. The first
step, in consultation with the appropriate people in the sales department, would be
to determine if that 5% goal is realistic and attainable. If so, the 5% sales growth
objective is shared with the entire sales department and individuals are assigned
specific targets. Let’s assume this is a regional firm that has seven sales
representatives. Each sales rep is charged with a specific goal that, when combined
with their colleagues, rolls up to the 5% sales increase. The role of management is
now to support, monitor, and evaluate performance. Should a problem arise, it is
management’s responsibility to take corrective action. If the 5% sales objective is
met or exceeded, rewards can be shared. This MBO cycle applies to every
department within an organization, large or small, and never-ending.
The MBO Process

Drucker’s contributions to modern management thinking went far beyond the MBO
concept. Throughout his long life, Drucker argued that the singular role of business
was to create a customer and that marketing and innovation were its two essential
functions. Consider the Apple iPhone. From that single innovation came thousands
of jobs in manufacturing plants, iPhone sales in stores around the globe, and profits
returned to Apple, enabling them to continue the innovation process. Another
lasting Drucker observation was that too many businesses failed to ask the question
“what business are we in?” (Drucker, 2008, p. 103). On more than one occasion, a
company has faltered, even gone out of business, after failing to recognize that
their industry was changing or trying to expand into new markets beyond their core
competency. Consider the fate of Blockbuster, Kodak, Blackberry, or Yahoo.
Management theories continued to evolve with additional concepts being put forth
by other innovative thinkers. Henry Mintzberg is remembered for blowing holes in
the idea that managers were iconic individuals lounging in their offices, sitting back
and contemplating big-picture ideas. Mintzberg observed that management was
hard work. Managers were on the move attending meetings, managing crises, and
interacting with internal and external contacts. Further, depending on the exact
nature of their role, managers fulfilled multiple duties including that of
spokesperson, leader, resource allocator, and negotiator (Mintzberg, 1973). In the
1970s, Tom Peters and Robert Waterman traveled the globe exploring the current
best management practices of the time. Their book, In Search of Excellence, spelled
out what worked in terms of managing organizations. Perhaps the most relevant
finding was their assertion that culture counts. They found that the best managed
companies had a culture that promoted transparency, openly shared information,
and effectively managed communication up and down the organizational hierarchy
(Allison, 2014). The well managed companies Peterson and Waterman found were
built in large part on the earlier managerial ideas of McGregor and Herzberg. Top-
notch organizations succeeded by providing meaningful work and positive
affirmation of their employees’ worth.
Others made lasting contributions to modern management thinking. Steven
Covey’s The Seven Habits of Highly Successful People, Peter Senge’s The Fifth
Discipline, and Jim Collins and Jerry Porras’s Built to Last are among a pantheon of
bestselling books on management principles. Among the iconic thinkers of this era
was Michael Porter. Porter, a professor at the Harvard Business School, is widely
credited with taking the concept of strategic reasoning to another level. Porter
tackled the question of how organizations could effectively compete and achieve a
long-term competitive advantage. He contended that there were just three ways a
firm could gain such advantage: 1) a cost-based leadership – become the lowest
cost producer, 2) valued-added leadership – offer a differentiated product or service
for which a customer is willing to pay a premium price, and 3) focus – compete in a
niche market with laser-like fixation (Dess & Davis, 1984). Name a company that fits
these profiles: How about Walmart for low-cost leadership. For value-added
leadership, many think of Apple. Focus leadership is a bit more challenging. What
about Whole Foods before being acquired by Amazon? Porter’s thinking on
competition and competitive advantage has become timeless principles of strategic
management still used today. Perhaps Porter’s most significant contribution to
modern management thinking is the connection between a firm’s choice of strategy
and its financial performance. Should an organization fail to select and properly
execute one of the three basic strategies, it faces the grave danger of being stuck in
the middle – its prices are too high to compete based on price or its products lack
features unique enough to entice customers to pay a premium price. Consider the
fate of Sears and Roebuck, J.C. Penny, K-Mart, and Radio Shack, organizations that
failed to navigate the evolving nature of their businesses.

The 21st Century

Managers in the 21st century must confront challenges their counterparts of even a
few years ago could hardly imagine. The ever-growing wave of technology, the
impact of artificial intelligence, the evolving nature of globalization, and the push-
pull tug of war between the firm’s stakeholder and shareholder interests are chief
among the demands today’s managers will face.
Technology
 Much has been written about the exponential growth of technology. It has
been reported that today’s iPhone has more than 100,000 times the computing
power of the computer that helped land a man on the moon (Kendall, 2019).
Management today has to grapple with the explosion of data now available to
facilitate business decisions. Data analytics, the examination of data sets, provides
information to help managers better understand customer behavior, customer
wants and needs, personalize the delivery of marketing messages, and track visits
to online web sites. Developing an understanding of how to use data analytics
without getting bogged down will be a significant challenge for the 21st century
manager. Collecting, organizing, utilizing data in a logical, timely, and cost-effective
manner is creating an entirely new paradigm of managerial competence. In
addition to data analytics, cybersecurity, drones, and virtual reality are new,
exciting technologies and offer unprecedented change to the way business is
conducted. Each of these opportunities requires a new degree of managerial
competence which, in turn, creates opportunities for the modern-day manager.
Artificial Intelligence
Will robots replace workers? To be sure, this has already happened to some degree
in many industries. However, while some jobs will be lost to AI, a host of others will
emerge, requiring a new level of management expertise. AI has the ability to
eliminate mundane tasks and free managers to focus on the crux of their job.
Human skills such as empathy, teaching and coaching employees, focusing on
people development and freeing time for creative thinking will become increasingly
important as AI continues to develop as a critically important tool for today’s
manager.
Globalization
Globalization has been defined as the interdependence of the world’s economies
and has been on a steady march forward since the end of World War II. As markets
mature, more countries are moving from the emerging ranks and fostering a
growing middle class of consumers. This rising new class has the purchasing power
to acquire goods and services previously unattainable, and companies around the
globe have expanded outside their national borders to meet those demands.
Managing in the era of globalization brought a new set of challenges. Adapting to
new cultures, navigating the puzzle of different laws, tariffs, import/export
regulations, human resource issues, logistics, marketing messages, supply chain
management, currency, foreign investment, and government intervention are
among the demands facing the 21st century global manager. Despite these
enormous challenges, trade among the world’s nations has grown at an
unprecedented rate. World trade jumped from around 20% of world GDP in 1960 to
almost 60% in 2017.
Trade as a Percent of Global GDP
Despite its stupendous growth, globalization has its share of critics. Chief among
them is that globalization has heightened the disparity between the haves and the
have-nots in society. Opponents of globalization argue that in many cases, jobs have
been lost to developing nations with lower prevailing wage rates. Additionally,
inequality has worsened with the wealthiest consuming a disproportionate percent
of the world’s resources (Collins, 2015). Proponents counter that on the macro level,
globalization creates more jobs than are lost, more people are lifted out of poverty,
and expansion globally enables companies to become more competitive on the
world stage.
Since the election of Donald Trump as President of the United States in 2016 and
Great Britain’s decision to exit the European Union, the concept of nationalism has
manifested in many nations around the globe. Traditional obstacles to expanding
outside one’s home country plus a host of new difficulties such as unplanned trade
barriers, blocked acquisitions, and heightened scrutiny from regulators have added
to the burdens of managing in the 21st century. The stage has been set for a new
generation of managers with the skills to deal with this new, complex business
environment. In the 20th century, the old command and control model of
management may have worked. However, today, with technology, artificial
intelligence, globalization, nationalism, and multiple other hurdles, organizations
will continue the move toward a flatter, more agile organizational structure run by
managers with the appropriate 21st century skills.
Stakeholder versus Shareholder
What is a stakeholder in a business, and what is a shareholder? The difference is
important. Banton (2020) noted that shareholders, by owning even a single share of
stock, has a stake in the company. The shareholder first view was put forth by the
economist Milton Friedman (1962) who stated that “There is one and only one social
responsibility of business – to use its resources and engage in activities designed to
increase its profits so long as it engages in open and free competition, without
deception or fraud” (p. 133). In other words, maximize profits so long as the pursuit
of profit is done so legally and ethically. An alternate view is that a stakeholder has
a clear interest in how the company performs, and this interest may stem from
reasons other than the increase in the value of their share(s) of stock. Edward
Freeman (1999), a philosopher and academic advanced his stakeholder theory
contending that the idea was the success of an organization relied on its ability to
manage a complex web of relationships with several different stakeholders. These
stakeholders could be an employee, a customer, an investor, a supplier, the
community in which the firm operates, and the government that collects taxes and
stipulates the rules and regulations by which the company must operate. Which
theory is correct? According to Emiliani (2001), businesses in the United States
typically followed the shareholder model, while in other countries, firms tend to
follow the stakeholder model. Events in the past decade have created a shift toward
the shareholder model in the United States. The financial crisis of 2008/2009, global
warming, the debate between globalization and nationalism, the push for green
energy, a spate of natural disasters, and the world-wide impact of health crises such
as AIDS, Ebola, the SARS virus and the Coronavirus have fostered a move toward a
redefinition of the purpose of a corporation. In the coming decades, those
companies that thrive and grow will be the ones that invest in their people, society,
and the communities in which they operate. The managers of the 21st century must
build on the work of those that proceeded them. Managers in the 21st century
would do well if they heeded the words famously used by Isaac Newton who said “If
I have seen a little further, it is because I stand on the shoulders of giants” (Harel,
2012).

Critical Thinking Questions

In what way has the role of manager changed in the past twenty years?
With the historical perspective of management in mind, reflect on changes
you foresee in the manager’s role in the next 20 years?
Reflect on some of the significant issues you have witnessed in the past
few years. Among thoughts to consider are global warming, green energy,
global health crisis, globalization, nationalism, national debt, or an issue
of your choosing. What role do you see business and management playing
in effectively dealing with that specific issue?
How to Answer the Critical Thinking Questions
For each of these answers you should provide three elements.
1. General Answer. Give a general response to what the question is asking, or
make your argument to what the question is asking.
2. Outside Resource. Provide a quotation from a source outside of this
textbook. This can be an academic article, news story, or popular press. This
should be something that supports your argument. Use the sandwich
technique explained below and cite your source in APA in text and then a list
of full text citations at the end of the homework assignment of all three
sources used.
3. Personal Story. Provide a personal story that illustrates the point as well.
This should be a personal experience you had, and not a hypothetical. Talk
about a time from your personal, professional, family, or school life. Use the
sandwich technique for this as well, which is explained below.

Use the sandwich technique:

For the outside resource and the personal story you should use the sandwich
technique. Good writing is not just about how to include these materials, but about
how to make them flow into what you are saying and really support your argument.
The sandwich technique allows us to do that. It goes like this:

Step 1: Provide a sentence that sets up your outside resource by answering who,
what, when, or where this source is referring to.
Step 2: Provide the quoted material or story.
Step 3: Tell the reader why this is relevant to the argument you are making.
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The Four Functions of Management Copyright © 2020 by Dr. Robert Lloyd and Dr.
Wayne Aho is licensed under a Creative Commons Attribution-NonCommercial 4.0
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