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The Modern Theory of Management
Business Essentials · Chapter 7: Organizational Design and BehaviorSection 7.6 · lesson 41 of 10513 min · free with a free account
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In this lesson
From universal principles to approaches that fit conditions.
- Describe the 4 modern schools of management thought
- Explain systems thinking: interdependence, feedback, delay
- Write a contingency statement with a mechanism
- Select the right lens for a management problem
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Organizational Design and Behavior
The Modern Theory of Management
The early management writers searched for principles that would hold everywhere. The modern period begins when that search is given up. In this section we'll look at four modern schools of management thought. We'll spend most of our time on two of them, systems thinking and the contingency perspective. Together, they supply the framework the other schools work within. We'll see why one department's success can damage the whole organization. We'll learn to turn it depends into a claim you can actually test. And we'll finish with a method for choosing the right lens for a problem.
The Modern Period
Giving Up the Search for One Best Way
The classical writers of section seven point one looked for universal principles. A correct span of control, say, or a single best way to arrange work. The modern period gives up that search. It rests on a simple recognition. Organizations differ in size, technology, environment, and purpose. So an approach that works in one setting may fail in another. As a result, modern management thinking is less a single theory than a set of schools. Each one supplies a particular way of looking at problems, and a particular set of methods. We'll examine four. The quantitative school, the systems school, and the contingency school. And the behavioral school, introduced in section seven point one and developed in seven point four. Systems and contingency thinking get the most attention, because together they frame the others.
The Quantitative School
Management Science: Models of Decisions
The quantitative school, also called management science, represents management problems as explicit models. A model is a simplified mathematical or logical description of a situation. Analyzing it points to better decisions. Its techniques fall into a few categories. The working tools come later, in section eight point four. Optimization looks for the best allocation of limited resources, like the schedule that meets demand at the lowest labor cost. Queuing analysis asks how many service points will keep waiting lines acceptable. Inventory models decide how much stock to hold, and when to reorder. Forecasting projects future values, such as demand, from past patterns. And simulation experiments with a model, before any real change is made. The approach contributes discipline. It forces a manager to state objectives, constraints, and assumptions. And it handles combinations of factors too complex to reason through informally. But a model is only as good as its assumptions. A wrong assumption about demand produces a confident wrong answer. Factors that can't be quantified, like morale, reputation, or trust, are left out. And a factor left out is weighted at zero. Precision can also be mistaken for accuracy. Extra decimal places say nothing about whether the data are sound. So a cautious user treats a model's output as one input to a decision, and asks what the model omits.
The Systems School
The Organization as an Open System
The systems school views an organization as a system, a set of interdependent parts arranged to achieve a purpose. Every system has five features. Inputs are the resources it takes in. Materials, labor, capital, and information. Transformation is the set of processes that convert inputs into something of value. Outputs are the products, services, and results it sends out. Feedback is information about the outputs and their effects, which returns and lets the system adjust. And the environment is everything outside the boundary that affects the system, or is affected by it. An open system exchanges resources and information with its environment, and depends on that exchange to survive. A closed system is self-contained. Organizations are open systems. They need suppliers, customers, and capital, and must adapt to conditions they don't control. So environmental scanning, the continuing watch on the external environment, is a survival function. An organization that stops watching eventually loses touch with its customers, competitors, and regulators.
Interdependence
When One Department's Success Hurts the Whole
The central practical insight of the systems school is interdependence. The performance of each part depends on the performance of the others. Its consequence is that local optimization, improving one part without regard to the whole, can make the whole worse. Take a fictional company, Brenner Housewares. Its production department is measured on units produced per shift. To raise its count, production runs the longest possible batches, and ships them in mixed lots. The department exceeds its target. But distribution must now sort the mixed lots, and orders are delayed. And the warehouse fills with products customers aren't ordering. Production has succeeded by its own measure, while the organization suffers. Notice that nobody acted foolishly. Production did exactly what it was measured on. The remedy is to measure and manage the connections between the parts, and not only the parts.
More Systems Ideas
Synergy, Entropy, Equifinality
Four more ideas from the systems school are worth having. Synergy is when parts working together achieve more than the sum of what they'd achieve separately. It's related to emergent properties. Those are features of the whole that no single part possesses. A company's culture is an example. No one employee has it. Entropy is the tendency of a system to run down into disorder, without new energy and information from outside. That's why organizations that stop adapting decay. Equifinality is the principle that a system can reach the same goal by different paths. It undermines any search for one best way. Two organizations with quite different structures may reach equal results.
Figure 7.6.1
Feedback, Delay, and a Failing Handoff
Feedback loops deserve special attention. A balancing loop is one where information about a result triggers a correction, moving it back toward target. A rising complaint rate prompts a quality fix, for example. But a delay in the loop can cause overcorrection. A manager sees a stockout and orders heavily. The order takes weeks to arrive. Meanwhile the stockout continues, so the manager orders more. When the deliveries all arrive, the warehouse is overstocked, and the manager cuts orders sharply. That produces a new stockout later. The cycle comes not from foolishness, but from acting on stale feedback. This figure shows a fictional company as an open system. Along the bottom, a timely loop carries customer information back to production, and quality gets corrected. Along the top, a delayed loop sends old information to purchasing. And the handoff between production and distribution is marked as the failure point. That's where local success fails to reach the customer. The lesson is that problems often sit in the connections and timing between parts, which single-part measures don't reveal.
The Contingency School
What Works, Under Which Conditions, and Why
The contingency school holds that the best management approach depends on the situation. It answers the failure of universal principles by asking a sharper question. What's best, under which conditions? A contingency statement has a definite form. It names a condition, the approach that works better under it, and the mechanism. For example, when work is routine and the environment is stable, a mechanistic structure tends to be more effective. Why? Because tasks can be standardized, and the cost of rigid rules is low. The mechanism is what separates a real contingency statement from a bare assertion. Five contingency variables keep recurring. Size affects how much structure and formality are needed. Technology, the way work is done, matters especially in routine versus non-routine work. Environmental uncertainty is how stable and predictable conditions are. Strategy is the chosen way of competing. And workforce characteristics, like skills and experience, affect how much direction is appropriate. You've already seen this reasoning. Section seven point three used it to choose a structure, and six point four, a leadership style.
Beyond "It Depends"
Making Contingency Testable
The main criticism of contingency thinking is that it can slide into just saying it depends. That's always safe, and never useful. The discipline that answers this has four parts. Name the variable the answer depends on. State the direction of its effect. Give the mechanism that links them. And say what evidence would show the statement to be wrong. Follow those four steps, and a vague hedge becomes a testable claim. Now step back. Systems and contingency thinking play a different role from the other schools. Systems thinking supplies a way of seeing, interdependent parts shaped by connections, feedback, and delay. Contingency thinking supplies a way of choosing, the approach that fits the conditions. Together they form a framework, and the other schools become tools within it. The quantitative school analyzes part of a system. The behavioral school explains the people within it. Each is used well when the manager knows what it can and can't see.
Table 7.6.1
4 Lenses, 4 Blind Spots
Every school is a lens. It brings some features of a problem into focus, and blurs others. The quantitative school asks for the best decision, given the objective and constraints. Its method is explicit models. It contributes discipline, but excludes what can't be quantified. The systems school asks how the parts interact, and what the whole does, by tracing inputs, outputs, and feedback. It reveals interdependence and delay. But it can be abstract, and doesn't by itself say what to do. The contingency school asks what works under which conditions, matching approaches to variables like size and uncertainty. It replaces universal rules with tested conditions, but can slide into it depends without a mechanism. The behavioral school asks how people and groups behave, using observation, surveys, and analysis. It explains motivation, group dynamics, and culture. But it can understate structure, technology, and numbers. Each school has a blind spot that another school tends to cover. So using one school alone leaves its blind spot unexamined.
Choosing the Lens
Start From the Question You Face
Choosing a lens begins with the question you're actually facing. If the problem is how to split a fixed budget among competing uses, the quantitative lens is powerful. If a fix in one department has produced a problem in another, the systems lens is the natural choice. If the question is whether a structure should be centralized, the contingency lens asks about the conditions. If a team isn't cooperating, the behavioral lens is the place to begin. But most real problems need more than one lens. A sound diagnosis often uses a second lens to check the first. A budget model might look optimal, until a systems view shows what it does to the next department. The habit to build is simple. Name the lens you're using, and ask what it can't see.
Case Vignette (Composite)
The Fastest Picking Department
Here's a composite case, with a fictional company and person. Anselm supervises the picking department at Corvid Fulfillment, and he's evaluated on orders picked per hour. He has pickers skip the verification scan, and move straight from one order to the next. Within a month, his rate beats its target by a wide margin, and he's praised at a review meeting. Downstream, packing finds more orders with wrong or missing items, and has to stop and recheck them. Customer returns rise, and customer service fields more complaints. He could defend his numbers, or restore the scan and accept a lower rate. Or he could ask the operations manager to judge the department on orders shipped correctly. His own evaluation depends on the current measure. So the trade-off is his rating against the organization's results. The case turns on interdependence. Picking, packing, and customer service form a chain. A measure counting only speed at one stage made it rational to shift errors downstream, where they cost more to fix. The sound decision is to change the measure to one that follows the order to the customer, and restore the scan until then.
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