Continued from “Founding Fathers of Management”

Managers Galore – Part III

In the first quarter of the twentieth century, most businesses, particularly in the United States were swept by the floodtide of Scientific Management, the school of thought largely developed by Frederick Taylor. He had pioneered the use of time and motion studies, in which management would carefully break down tasks into simple chunks and then work out the best way for workers to execute, like automatons, the allotted chunks all the way down.

As part of the Scientific Management regime, companies also studied the effects of the physical environment on their workers. For example, they varied the lighting to find the optimum level of illumination for maximum productivity. They also experimented how devices like piped music, variations in temperature, different compensation schemes, and adjustment in the number of working hours in a day effected workers’ productivity.

One of the most famous of these was the so-called Hawthorne studies that were carried out by the Western Electric company at their Hawthorne plant in the 1920’s. Initially, the study focused on lighting and its impact on worker productivity.

Two conclusions emerged from these studies: the experimenter effect, and a social effect. The experimenter effect was that making changes was interpreted by workers as a sign that management cared about them, and more generally, it just provided some mental stimulation that was good for morale and productivity. The social effect was that it seemed that by being separated from the rest and being accorded special treatment, those being experimented upon developed a certain bond and camaraderie that also increased productivity

Human Relations Movement

Cumulatively, this led to the human relations movement aimed at studying the behavior of people in groups, in particular workplace groups and other related concepts in fields such as industrial and organizational psychology. It was in a way the outcome of the 1930s’ Hawthorne studies, which examined the effects of social relations, motivation and employee satisfaction on workers’ productivity. This, in turn, resulted in the creation of the discipline of the now-so-popular human resource management.

The famous Harvard anthropologist Elton Mayo, who was deeply involved in the Hawthorne studies, stands out as one of the main architects of the superstructure of management thought. His unique contribution to the corpus of management is four-fold:

First, is the emergence of Human Relations Approach. Mayo’s ideas were a turning point in human relations approach of the problems of management. He was the first to systematically recognize the importance of human beings in management. He maintained that human beings are complex and influential inputs in an organizational performance. The social and psychological needs of human beings cannot, therefore, be ignored, if management wants to enhance productivity.

Second: Non-Economic Awards: The earlier assumption was that workers will work more if they are offered more monetary incentives. Taylor was the main proponent of this approach. Mayo, on the other hand, maintained that the techniques of economic incentives were not only inadequate but also unrealistic.

He was able to show that humane and respectful treatment, sense of participation and belonging, recognition, morale, human pride and social interaction are sometimes more important than monetary rewards pure and simple.

Third: Social Man: Mayo developed a concept of the ‘social man’. He said that man is basically motivated by social needs and obtains his sense of identity through relationships with others. He is more responsive to the social forces of the informal group rather than managerial incentives and controls.

Four: Organization as a Social System. Mayo was of the view that informal relationships in the organization are more effective than formal relationships. People form informal groups to give vent to their feelings and seek guidance for action from such groups.
In Mayo’s words, “An organization is a social system, a system of cliques, grapevines, informal status systems, rituals and minute logical, non-logical and illogical behavior.” He was of the opinion that managers should maintain equilibrium between the logic of efficiency demanded by the formal organization and the demands of the social system. He thought that besides logic and facts people are also guided by sentiments and feelings.

Hawthorne experiments, on which Mayo built his postulates, were criticized for lack of scientific and vigorous research. The experiments were too narrow to warrant generalizations. Despite these observations Mayo’s work was a turning point in the development of management thought. And Mayo’s contribution to management theory helped pave the way for modern human relations management methods and techniques.

Elton Mayo’s work is considered by various academics to be the counterpoint of Taylorism and scientific management. Taylorism, sought to apply science to the management of employees in the workplace in order to gain economic efficiency through labor productivity. Elton Mayo’s work has been widely attributed to the discovery of the ‘social person’, making a plea for workers to be seen as individuals rather than merely robots designed to work for unrealistic productivity expectations. Its aim was to address the social welfare needs of workers and therefore elicit their co-operation as a workforce.

The widely perceived view of human relations is said to be one that completely contradicts the traditional views of Taylorism. Whilst scientific management tries to apply science to the workforce, the accepted definition of human relations suggests that management should treat workers as individuals, with individual needs. In doing so, employees are supposed to gain an identity, stability within their job and job satisfaction, which, in turn, make them more willing to cooperate and contribute their efforts towards accomplishing organizational goals. The human relations movement supported the primacy of organizations to be attributed to natural human groupings, communication and leadership.

Alfred Sloan

Another significant architect of twentieth century’s management superstructure was Alfred P. Sloan who deftly steered General Motors to be the foremost world corporation. His much-acclaimed memoir, My Years with General Motors, written in the 1950s but released only in 1964, exemplified Sloan’s vision of the professional manager and the carefully engineered corporate structure in which he worked. It is considered one of the seminal texts in the field of modern management education, although the state of the art in management science has grown vastly in the half century since.

Sloan is remembered for being a rational, shrewd, and an extremely successful manager, who led GM to become the largest corporation in the world, a position it held for many years even after his death. His rationality and shrewdness are also remembered by his critics as extending even to cold, plutocratic detachment or avarice.

Sloan and the management of GM in the 1930s and early 1940s – the time of the Great Depression, German re-armament, fascism, appeasement, and World War II – are part of a larger narrative about the complex nature of multinational corporations.

Like Henry Ford – a contemporary of Sloan with a rather special relationship to him as the other “head man” of an automotive colossus – Sloan is remembered today with a complex mixture of admiration for his accomplishments, appreciation for his philanthropic legacy, and unease about his attitudes during the interwar period and World War II.

Distorted Orientation

Sloan built, in retrospect, a very objective organization, a company that paid significant attention to policies, systems, and structures and not enough to people, principles, and values. He, the quintessential engineer, had worked out all the intricacies and contingencies of a foolproof system. But his system left out employees and society. One consequence of this management philosophy was a culture that resisted change. The system did not remain foolproof forever as was seen in GM’s problems of the 1980s, 1990s, and 2000s.

Sloan’s work at GM has also come under criticism for creating a complicated accounting system that prevents the implementation of lean manufacturing methods. Essentially, the criticism is that by using Sloan’s methods a company will value inventory just the same as cash, and thus there is no penalty for building up a huge inventory. Carrying excessive inventory is detrimental to a company’s operation and induces significant hidden costs. Sloan’s memoir, particularly Chapter 8, “The development of financial controls”, indicates that Sloan and GM appreciated the financial dangers of excess inventory even as early as the 1920s. However, as a later analysis indicates this theory was not successfully implemented in GM’s practice. For all of the intellectual understanding, the reality remained slow inventory turnover and an accounting system that functionally treated inventory similarly to cash.

Streetcar Scandal

Some of Sloan’s critics, such as Edwin Black, claim that Sloan was also instrumental in the demise of public city transport streetcars throughout the United States. That made every family car-dependent for moving around – a trend we in India seem to be copying in mindless imitation. GM was also found guilty of violating anti-trust laws, but on account of its considerable political clout the penalties imposed were nugatory, even for Sloan’s time: a $5,000 fine for the company and $1 fines for each convicted executive.

Perhaps the worst criticism of Sloan is how he collaborated with the Nazis. For instance, in August 1938, a senior executive of General Motors, James D. Mooney, received the Grand Cross of the German Eagle for his distinguished services to the Reich. Nazi armaments chief Albert Speer told a congressional investigator that Germany could not have attempted its September 1939 blitzkrieg in Poland without the performance-boosting additive technology provided by Alfred P. Sloan and General Motors. During the war, GM’s Opel Brandenburg facilities produced bombers JU-88, trucks, land mines and torpedo detonators for Nazi Germany.

David Farber, author of Sloan Rules: Alfred P. Sloan and the Triumph of General Motors (2002), goes to the extent of maintaining that: “GM destroyed Sloan’s files to protect itself from lawsuits regarding antitrust issues, the neglect of automobile safety and its investments in Nazi Germany.”

Defending the German investment strategy as “highly profitable”, Alfred Sloan told shareholders in 1939 that the company’s continued industrial production for the Nazi government was merely sound business practice. In a letter to a concerned shareholder, Sloan said that the manner in which the Nazi government ran Germany “should not be considered the business of the management of General Motors...We must conduct ourselves as a German organization. . . We have no right to shut down the plant.”

After 20 years of researching General Motors, Bradford Snell stated, “General Motors was far more important to the Nazi war machine than Switzerland ... Switzerland was just a repository of looted funds. GM’s Opel division was an integral part of the German war effort. The Nazis could have invaded Poland and Russia without Switzerland. They could not have done so without GM.”

Notwithstanding the above far-from-unjust criticism of Sloan’s and General Motors’ role, Sloan is undoubtedly one of the chief architects of the organizational superstructure of modern management.

Continued to “The Giant who Touched Day after Tomorrow”