Management Theories and Philosophies

| July 21, 2019

Question:

Management Theories and Philosophies

This assessment is based on the application of the history of management theory to a case study organisation and builds on the tutorial activities undertaken in the first three weeks of the module. The title of assessment one is as follows:

“With reference to appropriate literature on both the ‘classical’ and ‘human relations’ approaches to management theory, critically evaluate how these are applied to the Volkswagen Group today.”

The following points should be noted for this part of the assessment:

• This is an individual assessment, not a group task.
• Literature should be sourced from a range of journal articles and textbooks. A limited range of readings will be made available.
• Evidence should be presented in the form of information researched from the organization. This information should be referenced to reports, websites and other relevant documents to allow tutors to access it.
• The word count is 3000 words +/- 10%. This does not include the reference list but does include any appendices. Do not include lengthy appendices.
• Referencing will be the Harvard system as per University regulations.
• Hand-in will be via ‘turnitn’ by 23:59 on March 11thth
• Structure your work clearly. A suggested structure:

o INTRODUCTION
o OVERVIEW OF ORGANISATION (BRIEF)]
o REVIEW OF THEORY
o APPLICATION TO ORGANIZATION
o CONCLUSION

 

Answer:

Contents

Introduction. 2

Overview of Volkswagen Group. 3

Review of theory. 4

Classical approaches to management theory. 4

Application of these approaches to the Volkswagen Group’s Audi 10

Conclusion. 13

References. 14

 

Introduction

There are two main strands of discourse on management theory; namely the classical approach and “human relations” approach. Classical management theories emerged in the early twentieth century. The theories emphasized on strict control of employees, predictability of behavior, absolute and clearly-defined chains of command, and unidirectional downward influence. Examples of these theories include the theory of scientific management (Taylor, 1914), the theory of bureaucracy (Weber (1924), and the administrative theory (Fayol, 1937).

Proponents of the classical approach hold the view that employees only have physical and economical needs. Classical management theorists regard social needs as well as the need for job satisfaction as either unimportant or non-existent. It is on this basis that the classical theorists advocate centralized decision making, a high level of specialization of labor, and maximization of profits.

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Human relations approach, on the other hand, which is sometimes referred to as the “human relations school”, is almost entirely antithetical to the tenets of classical management theory (Boyett, 2000). The human relations approach advocates accommodation of all work routines as well as individual relational and emotional needs as the best way of ensuring increased productivity. This is contrary to the arguments of classical management theorists, who advocate the complete rationalization of all work routines. For this reason, it appears that the human relations approach was conceptualized in direct response to the classical approach to management theory.

This paper explores appropriate literature on both the classical and human relations approaches to management theory. On the basis of this analysis, the paper critically evaluates how the ideas discussed are applied to the Volkswagen Group today with specific focus being on Audi in the UK. Audi is one of the twelve brands that make up the giant European corporate entity.

Overview of Volkswagen Group

The Volkswagen Group is one of the largest automobile manufacturers in the world today. In 2011, the company’s share of the world car market stood at 12.3 percent . Headquartered in Wolfsburg, the company is the number one carmaker across Europe. However, the company has for a long time been in a more dominant position in the Western European market compared to other parts of Europe.

Twelve brands make up the Volkswagen Group, and they include Volkswagen, SEAT, Bugatti, Bentley, Audi, Porsche, Lamborghini, Scania, Volkswagen Commercial Vehicles, Ducati, MAN, and Scania. These brands operate from seven different European countries. Each of these brands maintains its own identity and character and is recognized as an independent corporate entity within the market. There is a great deal of variety in these brands; some are small cars with low fuel consumption while others are luxury-class, high-consumption cars. In the commercial vehicle category, the brands range from heavy tracks to buses and pick-ups.

The Volkswagen Group has also diversified in other business areas, including diesel engines, turbo-machinery, turbochargers, chemical reactors, compressors, and special gear units. To undertake these manufacturing activities efficiently, the Group has set up some 100 production centers within eighteen countries of Europe as well as some other nine countries in Africa, Asia, and the Americas. These production plants are run by a workforce of more than half a million employees.

The vehicles produced by the Volkswagen Group in these plants are sold in more than 150 countries. The Volkswagen Group endeavors to achieve its stated goal of offering safe, attractive, and environmentally friendly motor vehicles that set global standards despite the high level of competition within the automobile market.

Review of theory

Classical approaches to management theory

Classical approaches to management theory emphasized on a scientific approach to the process of managing the organization. This is the oldest approach in management theory, and its popularity grew between 1900 and the 1920s. In this approach, all efforts were being made to increase the efficiency of employees as well as organizations on the basis of management practices. For this efficiency to be improved, care observation of the operations at both the employee-level and organizational level was necessary.

The ultimate objective in classical approaches was the establishment of universal operational principles to achieve economic efficiency (Dasgupta & Gupta, 2009). The main areas of the classical approach include administrative, scientific, and bureaucratic management. In scientific management, the core objective is to derive “one best way” of doing a job. On the other hand, administrative management emphasizes on the role of the manager as well as basic managerial functions. As for bureaucratic management, classical management theorists are interested in guidelines for formalization of procedures and rules in a structured manner as well as a clearly-defined division of labor within the organization.

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In scientific management theory, the rule of thumb was for management to be analyzed scientifically with the aim of identifying the single most effective procedure for performing an organizational activity (Sagel-Horn, 2004). On the other hand, for administrative management theorists, management was seen as universal process whose core elements included planning, commanding, organizing, controlling, and coordinating.

Fredrick Winslow Taylor is regarded as the father of scientific management. He developed the concept of scientific management into a theory in which processes and workflows were analyzed with the aim of bringing about an improvement in labor productivity. Taylor considered efficiency a foundational principle in his theory. Experiments had to be carried out on various methods of production, particularly time-and-motion studies, with the aim of identifying the most efficient procedure for doing a job (Sagel-Horn, 2004).

At this point, it is imperative to point out that in reality, management is both a science and an art. It is science because in all instances, a manager has to adhere to certain principles. As an art, management requires the use of personal skill and continuous practice. For any function of management to succeed, aspects of science and art have to coexist.

However, in the case of Taylor’s scientific management theory, management was analyzed from a strictly scientific perspective. This was in contrast to the Fayol’s administrative theory, in which management was viewed as a process through various activities and courses of action were planned, organized, commanded, coordinated, and controlled.

According to Koontz (1980), classical scientific management theorists were interested in addressing the problem involved employees’ tendency to purposively operate below their capacity. The workers did this because they believed that an increase in their productivity would push some of them into unemployment since only a few employees would be needed. They also feared establishing a faster pace that would readily be adopted as the new standard. Moreover, reliance on rule-of-thumb approaches to problem solving inspired scientific management theorists to think about ways of determining the most appropriate method of  performing a task through careful scientific experiments (Guest, 1997).

Many questions have been asked regarding the relevance of scientific management in today’s organizational setting (Sheldrake, 2003). Whenever these questions are asked, time and motion studies come to mind. Instead of going into detail regarding the time and motion studies, it is imperative to assess the most crucial things that Taylor came to associate with inefficiency (Taylor, 1914). These factors include lack of motivation of the part of management, a mismatch between job and skill, and the lack of standard techniques or tools.

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Some of the principles that Taylor came up with are of relevance even in today’s manufacturing contexts, for instance in the case of Volkswagen Group, an automobile company. One of these principles entails selection, training, and development of every employee. In fact, this has become an established tradition, not just in manufacturing but also in service industries. Similarly, the principle of cooperation between management and employees has also been universally embraced. In this undertaking, the objective is normally to ensure that the techniques approved for achieving the intended objective are being strictly followed. In most cases, different companies adopt different techniques as a way of achieving and maintaining competitive advantage (Rowlinson, 2009).

On the overall, the scientific management theory brought about three core contributions. First, it demonstrated the crucial role played by compensation as far as performance by employees is concerned. Secondly, the theory ushered in a new era where tasks and jobs would be subjected to careful study and scrutiny. Thirdly, scientific management led to the emergence of new ideas relating to the importance to selection of individual employees and training.

However, the scientific approach has been widely criticized for failing to appreciate the workers’ higher needs as well as the social contexts in which they go about their daily routine tasks (Mintzberg, Lampel, & Ahlstrand, 2005). Moreover, critics point out the fact that the theory promotes a culture where the employees suggestions are ignored. In most instances, the criticism is a pointer to the various drawbacks of the theory. For instance, the theory promoted monotony of work as well as triggered resistance to new ways of performing certain tasks.

In contrast, Fayol’s administrative theory empathizes on an in-depth analysis of the various functions of management (Fayol, 1937). In this regard, management is viewed as a profession where intensive training and development is required. Pursuant to this appreciation of professionalism was the establishment of a clear distinction between management and technical skills (Carroll & Gillen, 1987). In all industrial enterprises, activities fall into six categories, namely commercial, technical, security, accounting, financial, and managerial. In technical activities, materials are processed, goods produced, and operations carried out. On the other hand, commercial activities involve buying, selling, and transactional exchange while financial undertakings entail the optimum utilization of capital.

The principles that Henry Fayol came up with continue to dominate today’s corporate world (Taylor, 1914). Division of labor, for instance, has led to the creation of job specialization. On the other hand, unity of direction defines a platform on which a plan of action is defined and then used as a guide for all operations of the organization. It is also noteworthy that the principle of equity has contributed to the establishment of numerous anti-discrimination laws aimed at maintaining fairness, justice, and respect among all employees regardless of their cultures, origin, or social background.

The growth of discourse on general administrative theory was accelerated by the introduction of the idea of bureaucratic organizations by Max Weber, a German theorist. Weber was a staunch supporter of Fayol’s general administrative theory. During the 1800s, most organizations in Europe were being managed using a family-like approach where all employees pledged loyalty and allegiance to one individual. Weber envisioned a future scenario where the organizational management would be undertaken on a rational but impersonal basis, leading to the emergence of a form of organization referred to as bureaucracy (Weber, 1924).

The main characteristics of a bureaucracy include rational authority, employee advancement on the basis of qualification and competence, and reliance on uniformly-applied rules and regulations (Weber, 1924). Other attributes of bureaucracy include division of labor, hierarchical organization, and managers’ reliance on legal power vested in their positions (Cole, 2004). However, the term bureaucracy has taken on a negative connotation today, where it is associated by the existence of endless rules and procedures. Nevertheless, it remains the standard way of handling employees in a large organization such as the Volkswagen Group. Moreover, the bureaucratic tradition of according uniform treatment to all employees has in many cases laid the foundation for the achievement of high levels of efficiency in today’s large, complex organizations.

The ‘Human relations’ approach to management theory is antithetical to classical management theory (Bennis, 1959). In this approach, emphasis is on accommodating work routines and the relational and emotional needs of the individual employees to increase productivity. Human relations theorists consider classical management approaches too rigid because of their preoccupation with the rationalization of workplace routines.

This approach was also introduced to respond to the historical opposition between labor and management, leading to the polarization of the social climate. In this regard, the human relations approach dwells mostly on the extent to which employees and organizational managers share certain economic interests relating to the success of the organization. In this way, the approach seems to downplay the idea of class struggle as expounded on by Marxist theorists.

Human relations theorists view the business organization as a fully cooperative enterprise in which a primary factor contributing to productivity is morale. On this basis, the theorists recommend the modification of the work environment with the aim of increasing morale and developing more skilled workers.

Several principles have become synonymous with the efforts of human relations theorists to modify the work environment. The principles include decentralization, the development of self-motivated employees, and participation decision-making (Crainer, 2000). In the decentralized environment, the strict hierarchical structure suggested by classical management theorists is done away with and its place taken by departments with greater autonomy in decision making. In these departments, informal communication channels are promoted.

Regarding self-motivation, the theory promotes a system that encourages employees to set their own work-related goals and monitor their own performance in efforts to achieve them (Guest, 1987). A primary goal of managers therefore involves the design and implementation of organizational structures that provide rewards for goals achieved in an environment of autonomy and self-motivation. In essence, this entails a complete overhaul of the relationship between the supervisor and the subordinate as stipulated in classical management theories.

Application of these approaches to the Volkswagen Group’s Audi

In this section, focus is on the extent to which Volkswagen Group’s Audi automobile company has incorporated various management theories in its corporate undertakings. At Audi in the UK, special emphasis is put on the concept of “corporate governance”. The term is used in reference to efforts aimed at bringing about transparent and responsible management as well as the supervision of the companies to ensure that there is sustainable value creation.

In the pursuit of corporate governance, Audi’s managers in the UK endeavor to achieve the highest levels of national values as well as international management principles. These efforts are an indication of that the company’s operations in the UK take the form of a bureaucracy, where the employees’ advance is based on qualification, competence, and performance. In efforts to achieve this goal, the Audi Group has established several divisions, each operating with a certain degree of autonomy to enable its workforce gain self-motivation in the objective of achieving the intended goals.

In regard of the establishment of these semi-autonomous divisions, Audi Group demonstrates its adherence to the principles of classical management theory, particularly the bureaucratic theory and the general administrative theory. In respect of adherence to national and international standards, Audi demonstrates the presence of an established bureaucracy, which is a core element of every large organization in the contemporary world.

In this bureaucracy, Audi UK is subject to the laws of the country in which it operates (Mintzberg & Lampel, 1999). Moreover, the rules that the company is subject to are uniformly applied to all other car-manufacturing companies across the UK. Moreover, the company is organized in a hierarchical manner; supervisors hold lower-level positions while the management team holds the company’s top positions. To operate efficiently, the managers rely on the legal powers vested in the positions they hold.

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Elements of scientific management theory are also evident in the manufacturing processes of the company. For instance, like in all “institutionalized” industries in the modern world, there are certain manufacturing standards to be adhered to by all automobile manufacturers. Some of these standards include fuel efficiency, environmental acceptability, and sustainability. Nevertheless,  internally, the company’s professionals in various fields have designed their own production systems while at the same time ensuring compliance with international standards. The objective of maintaining innovation within the company is to bring about differentiation, thereby creating competitive advantage. Some of the core areas of differentiation include logistical processes and a synchronized production system.

With regard to human relations theory, Audi Group has had to seek the most highly qualified workforce and to provide the necessary motivation. The survival of a company of Audi’s caliber depends a great deal on the ability to hire, motivate, and retain the most qualified professionals. This goal cannot be achieved through reliance on scientific management alone and its concepts of rote learning. Instead, there is a need for a human relations approach to be adopted, with one of the core areas being on remuneration.

The remuneration system at Audi, which is performance-based, is so impressive that company has achieved the reputation of one of the leading employers in the UK (Peng &  Pleggenkuhle-Miles, 2009). This remuneration applies even for the company’s management staff. Aspects of participatory decision-making, decentralization, and the development of self-motivated employees have created an environment where talents are developed, ideas shared, and innovations introduced. Other aspects of human relations theory discernible at Audi include excellent relations with all investors, collaboration between the Supervisory Board and the Board of Management, and transparency in all aspects of corporate communications.

In recent years, Audi, just like most institutionalized European car manufacturers, have been focusing almost exclusively on the domestic markets (Donnelly, 2002). However, the rapid rise of the car industry in Japan and countries such as Korea and Malaysia has jolted the European companies into action, forcing them to adopt a global strategy (Donnelly, 2002).

In the case of Audi, things have not been any different. The company’s managers in the UK have been embarking on efforts to set up divisions in regions such as the Americas, Africa, and Asia. This has necessitated the introduction of aspects of decentralization. In fact, the newly introduced global strategy has forced Audi in the UK to relook its bureaucracy and lean more towards the human relations management. This is largely because of the realization that the highly skilled employees who are relocated to the overseas divisions have to possess attributes of self-motivation for the intended corporate objectives to be achieved.

Conclusion

Each of the three classical management theories plays a crucial role in the way companies operate today. The scientific management theories are credited with the formalizations of rules relating to compensation as well as ushering a new era where tasks and jobs would be subjected to careful study and scrutiny. The theories also triggered a lively debate on bureaucracy and the importance of addressing issues of employees training and remuneration.

However, the rigidity of the classical management theories led to the emergence of the human relations approach. The classical approaches rigidly dwelt too much on the process of rationalizing work routines while neglecting the social context in which employees worked as well as the conflict between labor and management. The analysis of Volkswagen Group and specifically Audi UK demonstrates the applicability of the principles of the classical management theories as well as the human relations theory.

 

References

Bennis, W. (1959). Leadership Theory and Administrative Behavior: The Problem of Authority. Administrative Science Quarterly, Vol. 4, No. 3, pp. 259-301.

Boyett, J. (2000). The Guru Guide: The best ideas of the top management thinkers. Heinemann, London.

Carroll, S. & Gillen, D. (1987). Are the Classical Management Functions Useful in Describing Managerial Work? The Academy of Management Review. Vol. 12, No. 1, pp. 38-51.

Cole, G. (2004). Management theory and practice. John Wiley & Sons, San Francisco.

Crainer. S. (2000). The Management Century: A critical review of 20th century thought and practice. Columbia University Press, New York.

Dasgupta, M. & Gupta, R.(2009). Innovation in Organizations: A Review of the Role of Organizational Learning and Knowledge Management. Global Business Review, Vol.10, No. 18, pp. 203-223.

Donnelly, T. (2002). The European automobile industry: Escape from parochialism. European Business Review, Vol.14, No.1, pp. 30 – 39.

Fayol, H. (1937). The administrative theory in the state. London: Heinemann.

Guest, D. (1987). Human Resource Management and Industrial Relations. Journal of Management Studies.Vol. 24, No. 5, pp. 503–521.

Guest, D. (1997). Human resource management and performance: a review and research agenda. The International Journal of Human Resource Management, Vol. 8, No. 3, pp. 263-276.

Koontz, H. (1980). The Management Theory Jungle Revisited. The Academy of Management Review, Vol. 5, No. 2, pp. 175-187.

Mintzberg, H. & Lampel, J. (1999). Reflecting on the strategy process. Sloan Management Review, Vol. 2, No. 3, pp. 19-27.

Mintzberg, H. Lampel, J. & Ahlstrand, B. (2005). Strategy Safari: A Guided Tour Through The Wilds of Strategic Mangament. Free Press, Boston.

Peng, M. &  Pleggenkuhle-Miles, E. (2009). Current debates in global strategy. International Journal of Management Reviews, Vol. 11, No. 1 pp. 51–68.

Rowlinson, M. (2009). The Oxford handbook of business history. Oxford University Press, Oxford.

Sagel-Horn, S. (2004). The modern roots of strategic management. European Business Journal, Vol. 5, No. 9, pp. 133-142.

Sheldrake, J. (2003). Management Theory. Routledge, Berlin.

Taylor, F. (1914). The principles of scientific management. Boston: Harper-Collins.

Weber , M. (1924). Legitimate authority and bureaucracy. Organization Theory: Selected Readings, Vol. 2, No. 4, pp. 138-157.

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