Management Skill Berde, Csaba Management Skill


ábra - Figure 2: Steps in planning (own graph)



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1.2. ábra - Figure 2: Steps in planning (own graph)

The methods used by a manager to develop a plan for business success are complex and interdependent. Decision making takes place under varying degrees of uncertain conditions and risks. Techniques used to aid the process are:


  • Risk analysis: every decision is based on interactions amongst different factors/variables – each of which have their own probabilities (towards ‘success’). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of defined probabilities, estimates can be used.

  • Decision trees: the outcome (measure pre-decided e.g. cost or time) of every step in the decision is charted and a course selected on the most favorable outcome. Very much like making a trip, navigating by using a road-map. (Koontz, H. - Weihrich, H., 2004)

  • Flow Charts: as a process-guide to taking a decision and helps as a check-list of key variables, the sequence in which they fall and the interrelations. Key to making a choice or re-examining the paths taken are also indicated as risk-reduction devices. (See example in Koontz, H. - Weihrich, H., 2004, especially Figure 8-5)

  • Decision Support Systems: a wide variety of (proprietary) computer based programs are available for managers to use their time more effectively for decision making of semi-structured tasks – by providing alternative evaluations. They focus on the process of decision making, taking data provide by the management information systems in enterprises.

Below is a basic diagram on decision making:

1.3. ábra - Figure 3: Decision making (own graph)



Invariably, concepts of management have developed and continue to do so, as the economic world changes. There is no magic solution towards a perfect form of manager, just as there is no individual embodying the perfect manager.

1. References

Koontz, H. - Weihrich, H.(1988): Management, 9th Ed., McGraw-Hill Book Co., Singapore.

Koontz, H. - Weihrich, H.(2004): Management – a global perspective. MacGraw-Hill Co., New York.

Mintzberg, H.(1994): The Rise and Fall of Strategic Planning: Reconceiving the Roles for Planning, Plans, Planners, Free Press.

Robbins, S.P. - Coulter, M.(2004): Management. Prentice Hall, NJ.

Witzel, M.(2003): Fifty key figures in management. Routledge, London.

Derek, S. P. - Hickson, D. J.(2007): Great Writers on Organizations: The Third Omnibus Edition, Ashgate Publishing, London.

2. fejezet - 2. A History of Management

Management is as old as the human race; however, we know it well that some types of management roles and forms of behavior (pack leaders, queen bees etc.) can be observed in the animal kingdom as well. During the history of mankind, management tasks appeared first when it came to operating, controlling and organizing the first societies, like in the case of leading countries, armies and churches. Management also appeared in prehistoric societies as well when labor and labor processes had to be organized. Activities like hunting, obtaining food, self-defense or large-scale constructions, river control, construction of dams, irrigation networks, pyramids or cathedrals all required very serious management, organizing and controlling tasks. The structure, operation and control of world churches provide a lot of management experience and lessons for modern companies even nowadays. Unfortunately, very few written accounts were made about the management experience of old times and only small portion of them has survived (Sneider, 1981).

The appearance of independent economic organizations in the second half of the nineteenth century brought radical changes in management thinking. The operation of production organizations employing more and more workers brought forward the issues of organizing work. Modern “management” appeared when the first economic organizations, companies were established.

The first writings on the topic covered the organization of company-like activities but issues of control appeared at the end of the nineteenth and at the beginning of the twentieth centuries.

Taylor's Principles of Scientific Management is considered to be the first scientific book on the topic (Taylor, 1983). Marosi thinks that economic company theories actually tell little about the structure, organization and management of companies. Marshall is noted as one of the classic authors whose researches in economic history give some comprehensive answers to the questions of development of company organizations. Economists examined primarily the problems of costs, cost theories, efficiency and profitability. However, until recent times, economics has not cleared up such comprehensive issues as (1) how companies organize their production, (2) what directions, why and under what influence the organizational forms of production develop, (3) what internal controlling organization or management organization develops and how this organization reacts to production itself and (4) the role of human factors, emotions, attitudes and human conduct and behavior in the production processes. In fact, it is not the task of economics to examine these issues (Marosi, 1988).The first people who ventured to clear up and answer the above mentioned questions were experts who became managers from technologists and technocrats, like Taylor and Fayol. Later, sociologists, psychologists and social scientists began to examine the human issues of company operation. Experts from technical, technological fields and those with engineering views created trends characterized by strongly rational thinking in management. On the other hand, experts from the fields of human and social sciences created trends, which places human behavior and factors in the center. Consequently, two well-separated scientific concepts and paradigms can be recognized in management thinking. The former one can be called “objective rationalism”, while the latter one can be called “humanism”.

These two approaches have gone through the entire history of management and they can be recognized in each trend. When introducing the development of management thinking, we follow time order and we also classify and group the trends, theories accordingly.

1. 2.1. The age of the classic management school (1880 to 1920)

At the end of the nineteenth century, as a result of the development of technology, industrial production was booming in Europe and America as well. The primary management issues were related to the organization of production. The various tendencies of economic development appeared in the organization of companies too. The appearance and spread of railroads played a defining role in the development of differences between Europe and America (Chandler, 1977). In America, the long distances and the economic opportunities generated large-scale railroad constructions never experienced before. As a result, huge companies were established. The Pennsylvania Railroad Company already had 110,000 employees in 1890 but due to the long distances the owners could not take part in the control of the constructions. Thus, the ownership and management functions became separated quite early. Parallel to this, a great number of poorly skilled and illiterate workers were available. The large-scale constructions, the rapid economic development created a large number of job opportunities but the workforce available was largely unskilled.

In contrast, in Europe, companies evolved and were organized as a result of a natural development process. The owners and their family members managed the companies themselves, so the ownership and management functions were not separated (Kocka, 1969). The workforce was constant, appropriately skilled and characterized by loyalty and trust. These development tendencies, clearly visible in the economy, largely defined and actually created the basis of the different management philosophies and theories (Troitzsch, 1977). Learning about these processes helps us understand and interpret the differences and identities of the various management theories.

The management theories, which appeared at the turn of the 19th and 20th centuries can be considered classic based on their significance and effects. These theories, for the first time, tried to define the interrelations of management by using scientific methods. These theories can be summarized as classic management schools. The trends of the classic school are clear and it is obvious which findings had significant effects on the development of management. It is easy to describe the classic school, since it is not hard to evaluate the various theories from a nearly 100-year old perspective. Management literatures define three basic trends within the school:


  • scientific management: represented by Frederick W. Taylor (1856 to1915),

  • industrial administration: represented by Henry Fayol (1841-1925) and

  • bureaucratic theory of management: represented by Max Weber (1864 to1920)

“Scientific management” was laid out in its final form in Taylor's Scientific Management Taylor, 1911). As a result of the peculiarities in American development, a management trend could evolve which considered the precise and scientific organization of labor as its main task. Taylor thought that the search for the technology of performing a given task should not be left to the workers but it should be planned in advance by using scientific methods and then the workers should be ordered to carry it out.

Based on this principle, Taylor separated physical and mental work. He also thought that the tools, the technology, the actions of work and their elements and time should be made uniform and standardized.

As a consequence of this, Gilberth developed his so-called motion study labor-organizing method. Based on this, a quarter of a century later MTM (Methods-Time-Measurement) was developed (Gilbert, 1911). Taylor thought that the method of task management should be applied. The workers have predetermined tasks and their wages are differentiated according to the performance of these tasks.

Taylor implemented the method of measuring and regulating actions of work in three phases. In the first phase, he carried out studies. In order to learn about work processes as much as possible, he divided the process into actions. By doing so, he could study how long it took to perform an action and the difference between the methods of experienced and poorly performing workers. The second phase was performing experiments. In this phase, Taylor selected the best elements of performing work based on the methods of well-performing and experienced workers. Then he organized these elements into a process. In the third phase, he made the “best way” developed during his experiments into rules. He made these rules mandatory methods for all workers. This regulation phase made it possible that production units achieved the required results even without a manager. The regulation covered the correct proportion between working time and leisure time. During the experiments, it became obvious that people can work with more efficiency if working and leisure periods follow each other in a reasonable way depending on the workload. Taylor noted that without the exact observation of leisure time periods even the best workers would have become entirely exhausted in four hours and they would have never achieved their assigned performance.

It should be emphasized that the individual performance-related pay system is a “Taylorist” invention. In Taylor's view, financial incentive played a central and exclusive role. He thought that the workers were interested only in money and they were willing to achieve higher performance only for higher wages.

This opinion led to the view according to which taylorism considered man “homo oeconomicus” who was willing to do anything only for money. Functional management is one of Taylor's most controversial views. This view states that by elimination one-person management, operation will have several functional managers. Taylor was not able to realize the system of a functional management without one-person management even at the company managed by himself. Later, he modified this principle and said that an organization having functional management combined with one-person management should be created.

Functional management was the first where technologists, programmers, job analysts, time calculators, quality inspectors and maintenance workers, that is, people with functional jobs were employed. From theoretical and practical viewpoints, the issue of having one-person management in the functional management is rather secondary. However, it is a fact that management without one-person leadership did not work. Neither Taylor nor anyone else could prove the experience of this management form in practice. However, it is very significant that by creating functional and special units, Taylor proved that production should be carried out based on procedures and solutions, which are scientifically devised by specialists. Technological development makes the introduction of functional management necessary. By doing so, the specialists' expertise and skill came to play a significant role in the management of production and functional experts became the parts of corporate power.

The effects and significance of “scientific management” is almost immeasurable not only because it was the first written scientific work on management theory but its influence has determined the development of management and management thinking and it became the starting point and basis of several new trends.

The causes and circumstances leading to the development of “industrial administration”, represented by Henry Fayol (1841 to 1935), a French mining engineer, showing a lot of similarities to taylorism since these two trends were developed nearly at the same time.

In order to increase profits and due to the development of technical and organizational relations, organization-related expectations grew stronger in Europe as well. The difference was due to the smaller geographical area and the different features of social and state development of Europe. As mentioned above, in America mostly unskilled workers were available, while in Europe and especially in Western Europe the industrial traditions created far more skilled workers. It was not a coincidence that Taylor focused on the better organization of the work to be done. Some of Taylor's critics noted that the main point of his work was to teach the workers how to work. In contrast with this, the European managers, who employed far more skilled workers, focused on increasing other areas of efficiency.

In his most famous work, “Administration industrielle et générale” (Industrial and general administration), Fayol wrote that the tasks of controlling and coordinating implementation and the administrative tasks are quite similar in both the industrial and the state administration organizations. Although Fayol took experience from industrial practice, he considered his organization and administrative findings valid in both the private and the state administration (Fayol, 1916).

Fayol was a learned engineer and similarly to Taylor, he knew his own field very well. His career, similarly to Taylor's, was that of a typical manager's. Fayol began to work in his profession then his attention was focused on issues related to the organization and management of labor. He applied his own principles of organization in practice after obtaining experience, performing and evaluating experiments. However, his situation was different from Taylor's since he tried to correct a metallurgical and mining company in serious trouble as its general manager.

The difference between Fayol's and Taylor's work was determined by the difference between their direct actions within their own companies. While Taylor focused on the work to be done and the organization of labor at the level of middle managers, Fayol, in his function, sought to devise principles and methods which covered all corporate activities and focused primarily on management. Fayol recognized the fact that beside the specialized professional activities a company and all other organizations needed scientific management and organizing activities, which he called administration. He also thought that administration contained the same elements in any organization established for some purpose. By applying his teaching to the state administration, the “industrialization of the state” or the application of proven management and organizing principles to state organizations began.

Fayol tried to place management among the functions of a company and he also tried to set out the management functions in a system. This effort started a long series of actions, which all have been trying to define and classify the management functions up to this day without achieving any scientifically acceptable results. Fayol stated the functions of management as follows: prediction (prognosis and planning), organization, motivation and inspection.

The bureaucracy theory devised by Max Weber states that a bureaucratic organization has strict hierarchical and subordination relations. Its members are skilled officials who do their jobs in a strictly defined order. Administration is done along predictable guidelines. Bureaucracy is the domination of impersonality, it operates without emotions or passion and it is exclusively affected by simple concepts related to duty. According to Weber, bureaucracy is the highest level of rationality and technical efficiency that is why bureaucratic control is so essential in controlling of individuals or things. The cause of the development of bureaucracy is the purely technical superiority of the bureaucratic organizations over any other forms (Weber, 1967). This superiority is owing to the fact that each task is carried out by specially trained bureaucrats and technocrats who constantly train themselves and increase their proficiency. Their work is driven by technicality, regulations, written form and rationality without emotions, anger and relations.  

Modern capitalist companies are good examples of developed and rigid bureaucratic organizations. With the concentration of means of production, bureaucracy will constantly grow. Weber thought that the future was all about bureaucratizing, since bureaucracy is the same as predictability and objectiveness, which protect the employees and the citizens against individual and social arbitrariness.

Weber was one of the most prominent representatives of sociology but he was also involved with philosophical, political and legal issues. He was one of the classic authors who started from social sciences and then got involved with humanistic management issues. However, Weber did not approach management from the human factor side but he did it from the organizational side. He laid out his organizational theory concept in Wirtschaft und Gesellschaft (Economy and Society). Later, Weber himself called the bureaucratic organization as the house of servitude.

The soulless bureaucrats, the organization people hiding behind the rules, the files, technicality and rationality lead to Kafka's world, which is characterized by alienated and cold organizations.  

2. 2.2. The theory of human relations (1920 to 1945)

In the first decades of the 20th century, management and organization was entirely under the influence of scientific approach, predictability and measurement. Examination and measurement methods of rational and science origin were devised. These methods were used to perform scientific examinations, research and experiments. It was essential that these experiments should be measurable and repeatable. People working for Western Electric Company in Hawthorn, near Chicago were working in a similar frame of mind. They also carried out experiments. They started from the hypothesis that there is a ulink between the luminosity of lighting and the workers' performance (Hormans, 1967). A work group was formed and placed in a workshop. Then the experiment began. At the beginning, the results seemed to confirm the hypothesis: the higher level the luminosity was, the higher level the performance achieved. However, when the luminosity was reduced to the initial level, contradictions appeared. The workers' performance continued to grow. The results were the same after several trials. Then Elton Mayo and his colleagues from Harvard Business School were asked to take part in the experiments and to confirm the hypothesis by carrying out the experiments precisely. The first experiments gave the same results as before. By examining the circumstances of the experiments, it was found out that earlier new work groups were formed for each experiment and the experiments were performed on these new work groups.

The conclusion was that the workers' performance was affected by the group and its formation rather than the physical environment. Mayo and his colleagues carried out experiments at the company for years and recorded tens of thousands of experiment protocols. Based on these experiments, Mayo and his colleagues devised the theories and results of the “Human Relations” management school. The significance of “Human relations” was that it was the first to scientifically confirm the role of human factors in economic processes. It is not a coincidence that these results were revealed by management research since the organization and performance of processes is the field where human factors have direct influence.  

“Human relations” revealed that labor performance is primarily determined by the human factors affecting group formation rather than the actual physical environment. It was cleared that the group has tremendous influence on the conduct and behavior of its members. The group affects the attitude and performance of its members.

This research became the basis of group sociology, management psychology, group research and group management. The basic unit of an organization was the group rather than the individual. An informal structure and the informal leader of the group were revealed behind the formal structure and these were considered as important factors. The performance of the workers is closely related to the level of satisfaction at the workplace: the higher the level of satisfaction is, the better the performance is. Economic incentives are not the only means to motivate people but feelings, emotions, attitudes, beliefs and values are also important. Companies are not only technical and economic organizations but also social ones. As social systems, companies affect the individual's organizational role and form specific norms and values.

As Marosi states, the classic management trend narrowed organizations to formal organizational factors and is characterized by rationality, the domination of science-related viewpoints and the underestimation of human factors. In contrast with this, the theory of human relations shows several significant differences from the classic trend (Rubinstein, 1966). The organization of a company is made up of groups; the relations of the production process are based on the human relations of the organization members. Trust is the integrating force of the organization rather than authority. Human behavior is affected by psychological factors as well and people can be very well motivated through these factors. Management needs not only technical knowledge but they also need social skills.

The management trend, which puts humans in the center of the economic production process was developed as a result of scientific research. Thus, this was the first scientifically proven theory, which tried to clear up the human role in the economic processes. It is interesting to note that it was the imperfection of research methods of the scientific management that led to the development of human relations.

The two paradigms, the two well-separated scientific ways of thinking and views has survived in the development of management science. The development of management science after World War II is outlined through the parallel development of “objective rationalism” and “humanism”. Of course, this task cannot be carried out in full since there has been a scientific boom in the field of management since 1950. There have been so many evolving theories, trends, schools, experimental and research results, so many books, studies and articles published and so many methods, procedures and training materials devised that a full review and classification of all these would be nearly impossible. In this short summary, only those few most important theories and trends are outlined which had significantly affected the further development of management science.

3. 2.3. The trends of objective rationalism

In the years after World War II, essential changes occurred in management thinking. The origins of these changes can be traced back to wartime production management methods. The new technical and scientific results of the war period such as the computer, cybernetics and the extreme precision of measurement technology and parallel to these, the growth of productivity, automation entirely changed the way of thinking.

A new kind of quality approach developed which was also the consequence of American wartime production methods and became widespread very rapidly in Japan and Europe after the war. With the appearance of the computer, there was an opportunity to apply new information technology methods. New planning methods appeared in the economy as well, operation research, linear programming and computer modeling developed.

From the end of World War II to the 1970s, owing to the spectacular development of mathematics and technical studies, rationality, material and technical thinking came to the foreground in management science, while humanism and the human role got to the background. Management science was mostly affected by operation research methods after World War II since the secrecy of the mathematical methods developed during the war ended and these methods were applied in economic life as well. Mathematical methods like linear programming, game theory, logistic planning, network planning and calculating probability became generally and widely used procedures in the management of companies.

Systematic thinking became widespread extremely rapidly in the field of management. This approach considers the management process as a series of closely related activities which comprise a system. This approach considers the organization itself as a system which has inputs (materials, money, tools and human resources), a transformation process (technology) and outputs (products, prices and services). The trend of “social systems” was represented by Barnard who was the director of the Bell Telephone Company and later a professor at Harvard University. Barnard (1938) considered organizations as social systems and he thought that each economic organization should be considered as a sub-system of a bigger system. A company as an organization consists of further sub-systems. Sub-systems include formal groups and individuals. The main integrating factors of the sub-systems are the common goal and communication. Barnard considered communication extremely important. He thought that this means makes the coordination between the organization members possible. The primary management task is the creation and maintenance of the organization communication system. Barnard thought that informal groups also played an important role in establishing efficient communication.

Management approaches considering and handling organizations as infinite systems straightly lead to the fact that these corporate systems can be handled with mathematical methods and automated computer procedures. Maynard thought that system organization developed those procedures and algorithms by which planning, decision-making and inspection can be handled in an automated way. The main filed where mathematical methods can be applied is decision-making. According to the theory of rational decision-making, the criteria of decision-making are constant and do not change, thus, the possible alternatives can become known and modeled, then the best alternatives can be picked. Based on this, the decision-making process can be programmed and automated. The biggest problem of the decision-making theory was uncertainty, which was caused by having insufficient information about the possible consequences of any decision. This problem was probably supposed to be resolved with some calculation methods (Maynard, 1977).

Boulding classified the systems into several cybernetic categories according to the their degree of development: (1) static structures (frameworks), (2) simple dynamic systems (clockworks), (3) cybernetic systems (thermostats), (4) open, self-maintaining structures (plants, animals and human beings considered as systems), (5) the social organization and finally (6) the transcendental systems (religions). Each level contains comprises the lower levels. Boulding (1969) held this true for both social and economic organizations. The basic unit is not the human being but the “role”. As long as the examination of the organization factors covered only the relations within the organizations, these theories were based on closed systems. Owing to the systematic approach, these theories started to consider and interpret organizations as open systems. Accordingly, a given system can always be divided into parts and these parts can be considered as further infinite systems. The entire system is more than merely the sum of the parts because it has qualities which are characteristic of the whole system. A system as a whole is separated from its environment but has interaction with it.

Systems can be placed into a bigger system, which is expressed by the hierarchy principle. A system has sub-systems which interact with one another. A system can be open or closed depending on the fact whether it is in connection with its environment or not. It is vital for open organizations to stay in touch with their environment if they want to maintain their operation. An open system has the feedback capability by which the necessary corrections can be carried out and it can differentiate and refine its structure as it grows bigger Astley–de Ven, 1983). The founders of the contingency theory thought that a manager's conduct is always determined by the given situation. The contingency or situation theory is an extension of the open system concept related to complex organizations. In contrast with the “single best solution” approach of earlier management theories, the supporters of this trend thought that a problem could have several good solutions and the selection of the most appropriate one depended on the circumstances. This theory can be outlined with Galbraith's (1973) two theorems.



  • management and organization do not have a single best way and

  • ways of management and organization in different situations are not equally efficient.

This theory developed based on the works of several authors (Burns – Stalker, 1961; Lawrance – Lorsch, 1969, 1967; Woodward, 1965, 1970; Thomson, 1967; Child, 1972, 1984; and Fidler, 1967). By examining organizations working in both stable and uncertain environments, these authors found that the companies operating in an uncertain environment developed structures, which represented high levels of differentiation and integration. At the same time, companies working in a stable environment had a lower level of differentiation. These results showed that environment conditions play an important role determining the appropriate organizational structures and management conduct.

It was shown that different types of organizations work in stable and uncertain environments. These were called mechanistic and organic types of organizations. Mechanistic organizations are those where labor tasks are clearly defined, well-structured and do not change. The structure is hierarchical, there are vertical communication systems. Loyalty and obedience are basic expectations. In organic organizations, the labor tasks constantly change. The performance of these tasks is more important than loyalty and obedience. Both vertical and horizontal communication channels are present. Importance and prestige are attributed to the activities toward the external environment.

There are three major lines within this theory: the technological, the grandeur and the external environment lines. The basis of differentiation is the factor affecting which determines the structure. According to this theory, the efficiency of management is related to the establishment of an organization which suits the environment best. The decisions concerning organizational development always depend on the environmental factors, that is, they are in a conditional or contingency relation with one another. Thus, from two organizational or management solutions, the more efficient one is always the one which can adapt to the environmental circumstances better and establishes correspondence between the environment and the organizational structure (Bakacsi, 1995).

One of the organization theory trends is the institutional theory. It examines how the state affects organizations. Its starting point is that organizations are in a subordinate position with the state and its institutions. Their relation is hierarchical. The institutional environment of the organizations expects the organizations to have some kind of reasonable structure, to understand the organizations and to be able to communicate with them. The ministry of financial affairs expects the organizations to have financial departments or groups, while the labor administration can keep in touch and communicate with the labor departments or groups. Organizations try to adapt to the expectations even when their own expectations are different.

In the relation of organizations and the state, the state controls resources needed by organizations. The institutional environment rewards those organizations, which adapt to the expectations: the state prefers the more adapting organizations when it comes to acquiring resources. The state forces organizations to follow definite action and organizational structures by using both formal and indirect compelling means. The stronger the compelling force is, the more similar the organizations are to the state structure and one another (Di Maggio – Powell, 1983).

A peculiar theory of the rational trends is popular ecology. This theory adapted biological concepts, Darwin's principles of ontogeny and the survival of the species and the theory of evolutions to the operation of economic organizations. The supporters of this theory believe that only those organizations can survive which are capable of obtaining the resources needed for their existence. Since the resources are not abundant and organizations compete for them, only the fittest will prevail and the weak will perish (Freeman – Hannan, 1977).

4. 2.4. Humanistic trends

Elton Mayo's career and the further development of the theory of “Human relations” were interrupted by the Great Depression in the 1930s and then by World War II. In the post-war years and decades, the role of human factors diminished due to the development of science and technology. However, humanistic trends did not vanish and their research did not stop either. Starting from the foundations of “Human relations”, behaviorist trends started to examine the role of humans in the economic processes.

The transition was MacGregor's Theory X and Theory Y. His invention starts from those basic features which were the characteristics of the classic rational school. Theory X devised by MacGregor is a motivational theory corresponding to the classic management school. This theory states that people are basically lazy. Do not want to work and they hate working. People must be forced to work, they are not creative and not imaginative at all. They are interested only in money. Thus, the style of management can only be autocracy. Control must be emphasized and strict order and discipline must be maintained. Orders must be given as commands and any failure of performing tasks must be strictly punished. Theory X bears the hypotheses and the ideology of the classic management school and it also contains empirical elements. However, MacGrefor moved from Theory X to Theory Y which corresponds to the ideas of human relations (McGregor, 1960).

According to Theory Y, money is not the only thing people can be motivated by, but they are willing to make serious physical and mental efforts to perform sensible tasks and achieve sensible goals. People do not hate labor, it is natural and desirable for them. People are capable of taking responsibilities and are basically creative and want to participate in creating things. People need community. Managers must pay close attention to the relations between people, the atmosphere of the workplace. Management must be characterized by openness, trust, continuous communication and the delegation of tasks. Eventually, MacGregor contrasted Theory Y, related to the ideology of human relations, with Theory X of the classic management school.

Kurt Lewin, a social psychologist, was a representative of the behaviorist trend. His activities were primarily significant in such areas as group dynamics, action research and the examination of behavior changes. In the group dynamics examinations initiated by him, the researchers tried to find out what individual, group and cultural factors determine a person's behavior in specific situations. Lewin (1975) regarded individuals as people whose actions were formed by internal and external forces. The momentary behavior is determined by the interaction, the changes, the size and the balance of these forces. The consistent and scientifically strict placement of individual behavior problems into a social environment revealed that the solution of management issues is not possible without taking formal and informal groups into account. In case of individual behavior changes, Lewin thought that group and cultural norms were the most important factors. Lewin carried out similarly pioneer investigations which have kept their significance up to this day and which examined how the formal manager's managing style affected the behavior and performance of the managed group. Lewin defined and separated three different management styles: autocracy, democratic and leissez faire (liberal). This classification is the basis of the management classifications even today.

Focusing on human issues and factors can be seen clearly in the motivational management theories. These theories address the basic issue of how influence, change and control people's conduct and behavior. The question can be answered only by examining the factors affecting human factors, needs, attitudes and satisfaction in relation to corporate organizations. Maslow's hierarchy of needs is based on the assumption that there is a hierarchy of order in satisfying human needs. Maslow called the low-level needs inferior. These are only physiological and safety needs. The needs at higher levels are superior. These are knowledge-self-realization and being acknowledged. Hierarchy means that the needs at higher levels are not motivated until the ones at lower levels are satisfied. The needs that have already been satisfied are not motivated either (Maslow, 1970).

It is the managers' task to find out the level of needs their employees are at in order to find the most appropriate way of motivation. The other famous line of the motivation trend was Herzberg's two-factor or motivation hygiene theory. Herzberg examined the factors causing both satisfaction and dissatisfaction. He found that the factors responsible for dissatisfaction are labor conditions, labor safety and salaries (he called them hygiene factors). Different factors are responsible for satisfaction (he called them motivators). These factors are related to labor and tasks. These are responsibility, independence opportunities of promotion. These findings have relevant consequences in management. If the factors causing dissatisfaction are eliminated, it does not mean that positive motivation is established. Only the factors causing dissatisfaction are stopped. The chapter titled “Motivation” of “Management psychology” covers the motivational theories in detail. The theories of the motivation bring attention to the fact that human factors are complex and complicated and they can be examined by using several approaches (Herzberg, 1974).

Herbert Simon, a Nobel-prize winner Belgian scientist, was a representative of the decision theory trend of organizational behaviorism. The classic school used assumptions in case of decision-making which proved to be wrong in real life. The classic authors accepted the idea of “homo eoconomicus”, the human being who always makes the right decisions under any circumstances. Simon thought that decision-makers do not make decisions this way. In his 1982 book, Models of Bounded Rationality, stated that decision-makers either follow through the principle of seeking satisfaction in order to find optimal solutions in a more realistic world or they try to find solutions in a simplified world. The latter decision-making situation is the one, which most often occurs in practice. Simon calls the decision made this way as satisfactory decisions (Simon, 1982).

His theory is focused on the decision-making process affected by environmental and psychological factors instead of the omnipotence of cold considerations and overall calculations. The outcome of decisions is not an optimum solution resulting from objective facts but it is a result which is considered satisfactory based on the decision-maker's expectations, observations individuality and world view. Rational decision-making has limits since the decision-makers' criteria are not constant but change continuously. The decision-makers cannot be aware of all possible alternatives, they cannot see the consequences of all alternatives, thus, they cannot get to the optimal alternative but they accept the first alternative, which seems satisfactory for them.

Simon’s theory brings up the role and effect of human factors in decision-making. He started a decision theory trend which develops new decision-supporting methods and systems by modeling human thinking. On the other hand, he brought up the question of the role of human emotions, anger, attitudes, values, empathy and intuitions in economic decision-making. Simon's theory resulted in switch to an entirely new scientific paradigm.

5. References:

Astley, G. A. – V. de Ven (1983): Central Perspectives and Debates in Organization Theory. Administrative Science, Quaterly.

Bakacsi Gy. – Balaton K. – Dobák M. – Máriás A.(1995): Vezetés – Szervezés. I. – II. Aula Kiadó, Budapest.

Barnard, Ch. J.(1938): Functions of the Executive. Harvard University Press.

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3. fejezet - 3. The concept and understanding of an organization

Literature abounds with definitions and explanations of what an organization should be. Some researchers into human organization are goal-oriented, focusing on the activities and outcomes of groupings of individuals. Klein (2001), for example, writes that an organization should be understood as several individuals in a purposefullycoordinated system of actions. Schein (1978) looks rather at how human organizations function as the arrangers and managers of activities, arguing that an organization only manages the undertakings of several individuals and assigns tasks or activitiesin order to implement a shared, openlyproclaimedpurpose or goal, when so ordered or on the basis of a chain of command. Others prefer to view organizations as means of handling change within groups, arguing that organizational relations consist of changing tension balances between interdependence and autonomy, between steering and self-organization. This concept not only applies to organizational change, but also to change management. It provides insights, which guide decisions in matters of organizational design and organizational culture. (Summarized from Mastenbroek, 1991, 1993)Finally, there is the view of the organization as identifier and facilitator, without which no concerted human activity would be possible. As only one example, organizational, social and economic processes ensure the conditions (human, machine, infrastructure, etc.) and frames (legal, monetary) for their utilizationif incorporated into a consciously constructed system (communicational, informational, power structural, etc.). Regardless of one’s focus in interpreting the meaning of what an organization is and why it exists, in the business world at least, an organization remains the unit we know as a company, i.e. a product producing or service providing organization or even an amalgam of both.

Several theories explain an organization and its structure. Classical organization theory includes the scientific management approach, Weber's bureaucratic approach, and administrative theory. The scientific management approach is based on the concept of planning of work to achieve efficiency, standardization, specialization and simplification. The approach to increased productivity is through mutual trust between management and workers. Taylor (1947) proposed four principles of scientific management: science, not rule-of-thumb; scientific selection of the worker; management and labor cooperation rather than conflict; and the scientific training of workers.

Weber's bureaucratic approach considers the organization as a part of broader society. The organization is based on the principles of: structure; specialization; predictability and stability; rationality; and democracy. Weber's bureaucratic approach is today often considered rigid, impersonal, self-perpetuating and empire building.

Administrative theory was propounded by Henry Fayol and is based on several principles of management. In addition, management was considered as a set of planning, organizing, training, commanding and coordinating functions. Neoclassical theory emphasizes individual or group behavior and human relations in determining productivity. The main features of the neoclassical approach are individual, work group and participatory management.

A modern approach to organization characteristics is based on the concept that any organization is an adaptive system which has to adjust to changes in its environment. Modern theories include the systems approach, the socio-technical approach, and the contingency or situational approach. The systems approach considers the organization as a system composed of a set of inter-related - and thus mutually dependent - sub-systems. Thus, the organization consists of components, ulinking processes and goals. The socio-technical approach considers the organization as composed of a social system, technical system and its environment. These interact among themselves and it is necessary to balance them appropriately for effective functioning of the organization. The contingency or situational approach recognizes that organizational systems are inter-related with their environment and that different environments require different organizational relationships for effective working of the organization.

A social organization is characterized by complexity, degrees of inter-dependence between sub-systems, openness, balance and multiplicity of purposes, functions and objectives. Why should goals be set? Goals are set to increase performance and provide control. How are goals set? Following management by objectives, the process of goal setting involves five steps. First, the overall objectives of the organization are set and then an action plan is evolved. The second step is to prepare members in the organization for successful implementation of the action plan. Individual goals are set in the third step. Periodic appraisal and feedback is the fourth step, to ensure smooth implementation of the action plan. Finally, an appraisal of performance by results takes place.

The concept of integration and coordination in the organization is based on controlling mechanisms for the smooth functioning of an organization. Organizational differentiation is the unbundling and re-arranging of the activities. Integration is re-grouping and re-ulinking them. The need for integration arises in the face of environmental complexity, diversity and change. Yet, how is integration actually achieved? Obviously, the structure of an organization should facilitate proper coordination and integration of different specialized units. If an organizational structure is not proper, then problems affecting operations result. Integration is achieved through vertical coordination along the hierarchy, decision-making levels, and span of control. There are several methods to improve integration. These include rules, procedures and professional training.

Within any organization, there is also the concept of power, which is ulinked to decision-making and communication. Power refers to the ability to get an individual or group to do something or to change in some way. Power could emanate from position, economic status, knowledge, performance and personality, physical or ideological traits. Power is one of the strongest motives, and affects setting of objectives and availability of resources in an organization.

Communication is another important process in the organization and is a key mechanism for achieving integration and coordination of the activities of specialized units at different levels in the organization. Communication can be horizontal, downward or upward. Communication, from a management point of view, involves the relaying of decisions within an organization, to those who are to implement those decisions. In the other direction, communication may be used by employees to inform the management about the results, consequences or even problems with a made decision. In any case, decision-making begins with goal setting, identification and evaluation of alternatives and the choice of criteria. How decisions are communicated and implemented depends on the nature of the organization in which they are made and on which the decision is acted. This brings us to the question of organizational theory.

Organizational theories explain organizations and their structure, and may be generally classified as being classical or modern.

1. 3.1. Classical organization theory

Classical organization theories (Taylor, 1947; Weber, 1947; Fayol, 1949) deal with the formal organization and concepts to increase management efficiency. Taylor presented scientific management concepts, Weber gave the bureaucratic approach, and Fayol developed the administrative theory of the organization. They all contributed significantly to the development of classical organization theory.

The scientific management approach developed by Taylor is based on the concept of planning of work to achieve efficiency, standardization, specialization and simplification. Acknowledging that the approach to increased productivity was through mutual trust between management and workers, Taylor suggested that, to increase this level of trust, the advantages of productivity improvement should go to workers, physical stress and anxiety should be eliminated as much as possible, capabilities of workers should be developed through training, and the traditional 'boss' concept should be eliminated.

Taylor developed the following four principles of scientific management for improving productivity:



  • Science, not rule-of-thumb: Old rules-of-thumb should be supplanted by a scientific approach to each element of a person's work.

  • Scientific selection of the worker: Organizational members should be selected based on some analysis, and then trained, taught and developed.

  • Management and labor cooperation: rather than conflict Management should collaborate with all organizational members so that all work can be done in conformity with the scientific principles developed.

  • Scientific training of the worker: Workers should be trained by experts, using scientific methods.

Considering the organization as a segment of broader society, Weber (1947) based the concept of the formal organization on the following principles:

  • Structure: In the organization, positions should be arranged in a hierarchy, each with a particular, established amount of responsibility and authority.

  • Specialization: Tasks should be distinguished on a functional basis, and then separated according to specialization, each having a separate chain of command.

  • Predictability and stability: The organization should operate according to a system of procedures consisting of formal rules and regulations.

  • Rationality: Recruitment and selection of personnel should be impartial.

  • Democracy: Responsibility and authority should be recognized by designations and not by persons.

Later, management science research found Weber's theory to be problematic, on account of several dysfunctions (Hicks - Gullett, 1975), such as rigidity, impersonality, displacement of objectives, limitation of categorization, self-perpetuation and empire building, cost of controls, and anxiety to improve status.

The elements of administrative theory (Fayol, 1949) relate to accomplishment of tasks, and include principles of management, the concept of line and staff, committees and functions of management.



  • Division of work or specialization: This increases productivity in both technical and managerial work.

  • Authority and responsibility: These are imperative for an organizational member to accomplish the organizational objectives.

  • Discipline: Members of the organization should honor the objectives of the organization. They should also comply with the rules and regulations of the organization.

  • Unity of command: This means taking orders from and being responsible to only one superior.

  • Unity of direction: Members of the organization should jointly work toward the same goals.

  • Subordination of individual interest to general interest: The interest of the organization should not become subservient to individual interests or the interest of a group of employees.

  • Remuneration of personnel: This can be based on diverse factors such as time, job, piece rates and bonuses, profit-sharing or non-financial rewards.

  • Centralization: Management should use an appropriate blend of both centralization and de-centralization of authority and decision making.

  • Scalar chain: If two members who are on the same level of hierarchy have to work together to accomplish a project, they need not follow the hierarchy level, but can interact with each other on a 'gang plank' if acceptable to the higher officials.

  • Order: The organization has a place for everything and everyone who ought to be so engaged.

  • Equity: Fairness, justice and equity should prevail in the organization.

  • Stability of tenure of personnel: Job security improves performance. An employee requires some time to get used to new work and do it well.

  • Initiative: This should be encouraged and stimulated.

  • Esprit de corps: Pride, allegiance and a sense of belonging are essential for good performance. Union is strength.

  • The concept of line and staff: The concept of line and staff is relevant in organizations which are large and require specialization of skill to achieve organizational goals. Line personnel are those who work directly to achieve organizational goals. Staff personnel include those whose basic function is to support and help line personnel.

  • Committees: Committees are part of the organization. Members from the same or different hierarchical levels from different departments can form committees around a common goal. They can be given different functions, such as managerial, decision making, recommending or policy formulation. Committees can take diverse forms, such as boards, commissions, task groups or ad hoc committees. Committees can be further divided according to their functions. In agricultural research organizations, committees are formed for research, staff evaluation or even allocation of land for experiments.

  • Functions of management: Fayol (1949) considered management as a set of planning, organizing, training, commanding and coordinating functions. Gulick - Urwick (1937) also considered organization in terms of management functions such as planning, organizing, staffing, directing, coordinating, reporting and budgeting.


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