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Tuesday, September 25, 2012

Lecture 3 Management Strategies

Lecture 3 discusses management strategies and the principles underlying a particular management style. Many management strategies have been used over the years and this course is based on a combination of well-known strategies. The resultant combination is a coherent strategy that has proven to be effective.

You can guess by now that what I am proposing is a management strategy that combines process improvement with increased worker motivation. We have to look at some history of management theory to see how this can be done. Interestingly, different management strategies have been developed by people with very different backgrounds, or what I call “management schools”. Figure 1 is a simplified outline of the strategies that we are interested in for this course and the schools that developed them.

 Figure 1. Management Strategies That Form the Basis for Effective Leadership

Effective leadership is derived by combining well known and well proven management strategies. Scientific management was developed in business schools. Fredrick Taylor is the “father of Scientific Management”. It stresses objectivity, measurement, precision and focuses on increased productivity. It appeals to Theory X managers. (If you are not familiar with Theory X and Theory Y managers be patient and we will get to definitions.) This management strategy has evolved to be Management by Objective (MBO) or some variant of MBO. In a typical organization that uses MBO strategic objectives are deployed downward to objectives for all managers. It works reasonably well and is popular in today’s short term focused environment. It is assumed for this course that the students are working in an organization that follows some form of MBO.
The limitation on the effectiveness of basic MBO is typically due to Theory X managers leading a top down driven process that limits employee participation in an organization’s decision making processes and often to over emphasis on management by numbers. Limited participation in decision making on objectives results in workers having limited buy in to the objectives and therefore limited motivation to achieve them. This happens even if rewards are tied to achieving the objectives. Over emphasis on numbers tends to neglect the importance of intuition, business philosophy and what Professor William Ouchi calls subtlety, i.e. taking into account personal traits and feelings of workers.
The human relations school efforts that resulted in what is popularly called Participative Management, started with Elton Mayo. Mayo did the work at the Hawthorne plant of Western Electric that led to defining the Hawthorne effect. The Hawthorne effect is an organization’s response just due to outside attention. Participative Management has concern for the worker as a human and what motivates humans. It appeals to Theory Y managers. At the name implies Participative Management involves employees much more in the organization’s decision making. Participative Management strategy also works reasonably well. The limitation on the effectiveness of Participative Management is due to Theory Y manager’s overemphasis on trying to keep workers satisfied at the expense of achieving objectives efficiently.
Theory Z was defined by William Ouchi, based on his work and the work of others, and derives from addressing problems organizations face when led by Theory X or Y managers. (See the book “Theory Z” by William G. Ouchi) Ouchi believed that it is possible for managers to combine MBO and Participative Management in a way that retains the effectiveness of each without the limitations of each. A Theory Z organization has a well-defined mission, business philosophy, and clear objectives. It also trusts employees and involves employees in the decision making process. It balances the importance of numerical measures with the importance of maintaining its core values and the trust and commitment of employees. Professor Ouchi’s research demonstrated that Theory Z organizations achieved higher productivity than either Theory X or Theory Y managed organizations. It addition, Theory Z companies become known as sources of well trained and effective managers.
Quality improvement was developed to improve product quality and reduce production costs. It was developed primarily by statisticians and physicists like Deming, Juran and Shewhart before WW II. Their work lead to approaches called statistical process control (SPC) and continuous process improvement (CPI). After WW II Genichi Taguchi, a Japanese engineer and statistician, added his famous quality loss function and design of experiment techniques called “robust design” that are particularly useful for engineering and manufacturing processes. In the 1980s Eliyahu M. Goldrat, another physicist, and his associates applied the theory of constraints to business processes and their work added to the earlier methods for improving the quality of processes. All of these techniques apply rigorous mathematical methods to the analysis of business processes. Where rigorous mathematics is too cumbersome heuristics or rules of thumb proven over long experience are used.
In the 1980s quality improvement was extended from production processes to all types of organizations: government, education, medical, etc. These quality improvement approaches are often grouped under names like Total Quality Management (TQM), Six Sigma or some company derived variant of these names. The quality improvement movement also led directly to what I call Effective Leadership in figure 1. This came about primarily through the work of W. Edwards Deming and his disciples. It is described well in Brian Joiner’s book “Fourth Generation Management: The New Business Consciousness”. Thus Effective Leadership is not new. It has been studied and successfully used since the 1980s. The reasons it is not more widely practiced are discussed lecture 4.
There are two reasons why I prefer to define the path to Effective Leadership as shown in figure 1. First, Effective Leadership is a simpler name than Fourth Generation Management and more descriptive. Second, I believe that when described as evolving from the quality improvement movement it seems not to have a sound foundation in management theory. It appears to be radically changed from past practices and many organizations have had difficulty implementing the philosophy directly. When viewed according to the path shown in figure 1 it is seen to have a solid foundation and it is easier to visualize the process of incorporating Theory Z and one of the variants of process improvement.
Note that by now you see that I assume you have familiarity with basic management theories and are at least aware of the names of important management gurus from the past. (Look up these gurus and theories in Wikipedia if you are not familiar with them.)  Just as you can’t do calculus without understanding arithmetic and algebra you can’t be an effective manager without understanding basic management theory and some of the rationale behind the theory. Since many students are already familiar with these basic theories and their developers I do not spend time on them in this course.
Why have I picked this combination of strategies?
•     We live in a short term environment and management by objective (MBO) has proven to work in this environment
•     Most businesses use MBO or a variant so most students are constrained to use this strategy by their work environment
•     However, MBO by itself has limited effectiveness because workers lack control, which stifles their motivation and therefore their effectiveness
•     Ochi addressed this limit by combining MBO with participative management to empower workers in his Theory Z strategy
•     Effective Leadership adds tools from the Quality Improvement School for managers and workers to enable empowerment that further motivates workers and achieves even more productive processes.
Summary of the history of methods discussed in this course:
The management strategies and the principles underpinning this course are not new.
•     Theory Z
–    Derived From Theory X & Theory Y~1960
–    Important contributions by Maslow, McGregor & others~ ‘60s & ‘70s
–    Practiced by leading companies in the ‘70s
–    Defined by William Ouchi in his book “Theory Z” in 1981
•     Process Improvement Principles
–    Developed 1900-1945, used effectively, primarily in USA
–    Forgotten in USA from 1945 to ~1980
–    Introduced by Deming and others to Japan post WW II and used to develop Japan’s reputation for high quality and low cost products
–    New methods were added by the Japanese, particularly by Taguchi
–    Reintroduced to USA in 1980’s to help US manufactures compete with Japan
–    Success in manufacturing led to adoption by other types of organizations
You will benefit from reading Theory Z, if it is available in your local library. Also, Google the following topics and read the Wikipedia descriptions: Theory Z, Elton Mayo, Hawthorne Effect, Douglas McGregor, Theory X, Theory Y, W. Edwards Deming, 14 Points, Genichi Taguchi, TQM, and Six Sigma. The listing for Theory Z will lead you to many of the other topics. Note one error in the discussion of Theory Z. It says American Companies were unsuccessful in implementing W. Edwards Deming’s approach to management. Whereas many companies may have tried and failed, I personally know of many companies that implemented Deming’s approach and were extremely successful.
After the readings answer these questions:
1.   What objectives of Ouchi’s Theory Z have become unlikely to be achievable in today’s business culture?
2.   Which theory (X, Y or Z) does the culture of your company fit best?
3.   Is your boss predominately Theory X, Theory Y or Theory Z?
4.   Which Theory does your personal style fit closest?
5.   Is your personal style compatible or in conflict with your company’s culture?
6.   Based on what you have learned so far can you identify any strengths and weaknesses of your management style?
At the completion of the homework and exercise you will be prepared to continue with Lecture 4.

If you find that the pace of blog posts isn’t compatible with the pace you  would like to maintain in studying this material you can buy the book “The Manager’s Guide for Effective Leadership” at:
or hard copy or for nook at:
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