THE HISTORY OF MANAGEMENT THOUGHTDaniel A. Wren, Chapter 1 & 2: History of management Thought

Chapter 1: A Prologue to the Past

A. To trace the significant periods in the evolution of management thought from its earliest days to the present. It will help us to :1. integrate our knowledge of leadership2. Provide a perspective on the past to apply to the present.3. Develop alternatives because our knowledge has been broadened and deepened by an

understanding of the past.

B. A Cultural Framework

The culture is our total community heritage of non-biological, humanly transmitted traits and include economic, social and political form of behavior associated with human race.

1. The economic facet – relationship of people to resources2. The social facet – relationship of people to other people3. The political facet – relation of the individual to the state4. The technological facet – related to the art and applied science of making tools and equipment5. Those elements are closely interrelated and interact to form the total culture.

C. People, Management, and Organizations1. Human being is fundamental unit of analysis for the study of mankind, management, and

organizations. Human basic needs and social needs led to the formation of family and groups, a primitive hierarchy of organization.

2. People found advantages in participating and cooperating with others to achieve goals, this lead to form of organization. The same common element of organization throughout history:2.1 There has to be a goal.2.2 People must be attracted to the purpose in order to participate.2.3 Organizational members need resources.2.4 Activities must be structured.2.5 Results were better achieved through the activity of management.

Chapter 2 : Management before Industrialization

A. Management in early civilization

1. The Near East :

Hammurabi (Babylonia), who introduced code of law, i.e. the code of 282 laws which governed business dealing, personal behavior, interpersonal relation, punishment and other social matter.

2. The Far East: 2.1 General Sun Tzu (China): He wrote of marshaling army into subdivision, established rank

among officers and using tools for communication. In short he pioneered of planning and strategy

2.2 Confucius (China): Left his mark on moral teaching and principle of personnel selection by merit, early bureaucracy, and division of labor

2.3 Canakya Kautilya (India): He advised trait approach for selecting leaders, use of advisers, establish departments with director and prepared detail job descriptions for various offices

3. Egypt

3.1 Joseph – best known vizier - from which the word supervisor is derived. In his era, the awareness of limit to the number of people one management could supervise, which known as the rules of ten

4. The Hebrew

Moses: he was able to employ an exception principle in managing, more orderly management structure like span of control and delegation

5. The Greece5.1 Socrates : He thought the transferability of managerial skills5.2 Plato : remarked on human diversify and how this led to the division of labor5.3 Aristotle: He worked on specialization of labor, departmentation, delegation, synergy,

leadership and scientific method5.4 Xenophon: described the advantages of specializing labor

6. Rome 6.1 Developed a quasi-factory system to manufacture6.2 Road system to speed distribution of goods6.3 Resembled the corporate organization in form of joint stock companies, which sold stock

to public6.4 There was highly specialized labor6.5 The states regulated all aspect of people economic life such as tariff of trade, fines for

monopolists, used revenues to finance wars

7. The Catholic Church7.1 Oldest living organization7.2 Conflict between centralized and decentralized authority still exists today –characterized

as the need for unanimity of purpose yet discretion for local problems and conditions.

8. Feudalism and the Middle Ages8.1 Caused by the development of free people as tenant farmers, growth of large estates,

political disorder, economic, social, and political chaos.8.2 Tied people to the land, fixed rigid class systems, established landed aristocracy, stopped

education, caused poverty and ignorance, and stifled human progress until the Age of Reformation.

9. The revival of commerce9.1 Marco Polo travels to the Far East – sees the “Rule of Ten” in the Tatar tribes. Craft

Guilds – makers of goods; regulated job access. This led to the factory system as the volume of trade grew and the domestic system proved inefficient and the need for more capital

9.2 Growing Trade also required a rationalization of the methods of keeping accounts. Fransesco Datini of Prato and Genoa and the Medisis of Florence introduced the system of double-entry accounting. Whilst Luca Pacioli pioneered the first management information system (cash & inventory position and a check on cash flow) developed in 15th century, through his writing Summa de Arithmetica, geometrica, proportioni, et proportionalita

9.3 Saint Thomas Aquinas in 13th century had addressed the issue of justice in trade matters with the idea of “Just Price”; Price should be just; Seller should beware and not engage with trickery, intimidation nor sell simpletons; and Speculation was a sin.

B. The Cultural Rebirth

1. Protestant Ethic 1.1 Max Weber’s Thesis

a. In the condition of loosening of religious bonds by the crusades and the spread of general prosperity through the revival of commerce, Martin Luther showed as the architect of the Protestant reformation. This was followed by John Calvin, who gave the basic attitude for rational capitalism.

b. According to Max Weber, Luther developed the idea of a calling in the sense of a task set by God. This idea became a central dogma of Protestant denominations. It placed worldly affairs as the highest form of moral activity for the individual. Every person’s occupation was a calling and all were legitimate in the sight of God. This calling placed new interpretation on the purpose of life, which people should choose and pursue occupation, because it was divine will, instead of waited for the judgment day.

c. The result of the dogma was asceticism that asked people to renounce to labor for God glorification. The Calvinist was required to live of good works, this was keystone in developing a spirit of efforts and gain. They proved their faith by worldly activity, acting with zeal and self-discipline.

d. New Protestant asceticsm a.k.a Puritanism did not condoned the pursuit of wealth for its own sake, in fact activity became the goal of good life. Some corollaries developed in practice (1) wasting time was the deadliest sin (2) willingness to work was essential (3) the division and specialization of labor was a result of divine will (4) consumption beyond basic need was wasteful and therefore sinful

e. The Protestantism resulted in a specific guideline for the creation of capitalism spirit. According to weber, an unequal distribution of goods in the world was divine providence at work, since each talent has unequal talents and thus reaped unequal rewards. The new age of individualism has been born.

1.2 A Criticism of the Weberian thesis

R.H. Tawney’s opinions: Capitalism existed before the Protestant Ethic. Capitalism was the cause and justification of the Protestant Ethic, not the effect. Growing economic life posed new problem for church doctrine and merchants and artisans engaged in profit-making activities regardless of dogma

1.3 Support for Webera. David C. McLelland; Supported for Weber in his observations of the influence of

religion on human attitudes toward work and self-reliance. He found the need of achievement (n achievement) of Protestants’ children was higher than children of Catholics, and children of Jews had still higher n achievement. The reasoning that McClelland support Weber (1) The Protestant Reformation emphasized self-reliance rather tan reliance on other (2) Protestant parents changed child-rearing practices to teach self-reliance and independences (3) McClelland demonstrated these practices led to higher need for achievement (4) A higher need for achievement led to spurts of economic activity

b. Lenski presented evidence in favor of Weber, which he found attitude and satisfaction toward work will influence the achievement. The finding showed that Jews and Protestants had more mobile than Catholics.

2. The Liberty Ethic

Give the postulates of a need for achievement and the sanctions of individual rewards for worldly effort, the political system must be conducive to individual liberty. There were radical ideas in those times, age of enlightments-that threatened the existing order:

2.1 Nicolo Machiavelli – The Prince (1513)

a. This was dedicated to Lorenzo di Peiro de Medici. It was exposition on how to rule successfully not how to be good or wise... He identified there ways to the top “fortune”, “ability” and “villainy”;

b. Machiavelli’s basic assumption about the nature of people was indicative of his rationale for the type of leadership he advocated: “whoever desires to found a state and give it laws, must start with the assumption that all men are bad and ever ready to display vicious nature , whenever they may find occasion on it”

2.2 Thomas Hobbes’s – Leviathan (1651)a. A later argument for s strong central leadership. Some great power, the Leviathan,

must exist to bring order from chaos. This person or body became sovereign since it had right to governed and could not be revoked (absolute sovereign)

2.3 John Locke’s Concerning Civil Government (1690)a. People have natural rights to property, contracts, a redress of grievances, and to

freely choose those who are to govern. His work set the stage for American revolution in 1776 by inspiring the authors of the Declaration of Independence and jean Jacques Rousseau’s Social Contract and the ensuing French Revolution

b. Locke put a new civil order (1) a law based on reason, not arbitrary dictates (2) a government deriving its power from the governed (3) liberty to pursue individual goals in natural right (4) private property and its use in the pursuit of happiness as natural and legally protected right

3. The Market Ethic

3.1 Mercantilism arose in the 16th and 17th centuries, as new lands were discovered through exploration, new trade routes and new products created an international market. This made the economic philosophy of mercantilism and injected the government into a central role of financing and protecting trade in order to build strong national economies. The mercantilists were a philosophical contradiction to the emerging 18th century Age of Enlightenment, since it only of the state, whereas the philosophy of the enlightenment championed individual rights and viewed all human institutions in terms of the contribution they could make to the happiness of each individual.

3.2 Francois Quesnay

The wealth did not lie in gold and silver but sprang from agricultural production. He advocated laissez-faire capitalism, meaning that the government should leave alone the mechanisms of the market; for him, economics had a natural order and harmony. The government intervention interfered with the natural course of events.

3.3 Adam Smith (1723-1790)

a. A Scottish political economist, he was influenced by that school's view of a natural harmony in economic. In Wealth of Nations, Smith found of liberal economics.

b. The tariff policies of mercantilism were destructive and these policies penalized efficiency by a state fiat and consequently misallocated the nation's resources. Smith proposed that only the market and competition be the regulators of economic activity. The "invisible hand" of the market would ensure that resources flowed to the best consumption and their most efficient reward, and the economic self-interest of each person and nation, acting in a fully competitive market, would bring about the greatest prosperity of all.

c. The concept of specialization of labor was a pillar of this market mechanism, because it can increase productivity, although he also foresaw its dysfunctional consequences:

d. The first edition of The Wealth of Nations was published in March 1776 and was sold out in six months; the second edition (1778) contained minor changes; but the third edition (1784) contained substantial revision, among them Smith's concern for joint-stock, that is, limited liability firms.

e. During Smith's time, the largest employers were textile firms, and these were not capital intensive. Yet Smith anticipated that the separation of shareholder ownership and management by non-owners had a potential downside. Those who managed "other people's money" incurred less personal risk (except, perhaps, the loss of their jobs) and would be less vigilant and prudent in their duties.

C. Summary 1. Early management thought was dominated by cultural values that were antibusiness, anti-

achievement, and largely antihuman. Industrialization emerged when people were urged to take thought of individual fulfillment in this world but to wait for a better one.

2. This cultural rebirth would establish the preconditions for industrialization and subsequently the need for a rational, formalized, systematic body of knowledge about how to manage. Competitive, changing environment, the manager had to develop a body of knowledge about how best to utilize resources.