Adam Smith (1723 – 1790) identified the division of labour and specialization as the two key means to achieve a larger return on production. Division of labour  is an economic concept which states that dividing the production process into different stages enables workers to focus on specific tasks. If workers concentrate on one small aspect of production, this increases overall efficiency. When employees concentrate on a specific task, with time they improve the necessary skill which is useful for a specific task and they perform better and faster which saves time and money, and enables increased production levels.

Smith found that factories in which employees specialized in only one or a few tasks had greater performance. In his famous example of a Pin Factory which he visited, each employee performed all 18 pin-making tasks. In fact, Smith found that 10 employees specializing in a particular task could, make 48 000 pins a day, whereas those employees who performed all the tasks could make only a few thousand at most. Smith reasoned that this difference in performance occurred because the employees who specialized became much more skilled at their specific tasks, and, as a group, were thus able to produce a product faster than the group of employees in which everyone had to perform many tasks. Smith concluded that increasing the level of job specialization, the process by which a division of labour occurs as different employees specialize in different tasks over time, increases efficiency and leads to higher organizational performance.

Fredrick Taylor (1856 – 1923) aimed at continuously increasing the efficiency of the production process. He divided labour into an elementary division of labour in which every worker was allocated their own tasks that had to be repeated constantly. Everyone was assigned their own program that consisted of successive actions and this was aimed at worker’s levels of knowledge and skills. This brought about considerable time savings and because of this routine, productivity increased rapidly. Taylor felt it was important to select the right person for the right job and to leave the planning and thinking to the specialists.

Division of labor allows economies of scale (ES). Economies of scale are the reduction in per unit cost of production as the volume of production increases. In other words, the cost per unit of production decreases as volume of product increases. Costs per unit can decrease as the volume of production increases for different reasons. ES helps at increasing cost advantages that a business obtains due to more units of output.

Division of labour allows specialization. Firms producing at a large scale employ a large number of workers. This allows the firms to practice specialization by splitting jobs into smaller tasks. These individual tasks are assigned to separate workers. In this way workers spend all their work time on the part they know best and it also allows them to perfect their skills. Overall result of this is that an average unit is produced at lower cost. Specialization also works at management level. For example in an organization you will find Marketing team, Human Resource Management team, Finance team, Operation team, Risk Management Team, Procuring team, Information Technology team etc, etc. On a small scale, a Civil Contractor while construction a house divides the work into civil engineer, supervisor, masons, and site labour, welder, plumber, electrician and interior designer.

Henry Fayol (1841 – 1925) recognized that division of labour leads to specialization and that specialization is considered as part of “the natural order” comparing it to the organs of the body. For example the GI tract (Gastro Intestinal which is responsible for digestion in body) are the mouth, esophagus, stomach, small intestine, large intestine, the rectum and anus. Food enters the mouth and passes to the anus through the hollow organs of the GI tract. The liver, pancreas, and gallbladder are the solid organs of the digestive system. Each of the organs listed herein is responsible for diction of food once it enters our body.

The object of division of work is to produce more and better work with the same effort, Fayol described. Fayol also said that division of labor helps in learning. As business firms grow, they learn from both experience and research. Firms gradually learn-by-doing and become more and more efficient. Firms also learn from research which results in better processes and new formulas pushing their production cost per unit even lower.

This very objective has not been altered in today’s modern business world. In a sense this principle is the fundamental feature of modern economy, allowing for the largest increases of productivity. Peter F. Drucker (1909 – 2005) said that the 20th century has seen a rate of 3% productivity increase per year, hence productivity rose 50 fold since the time of Frederick Taylor, who acted as a catalyst in the development of division of work.

An example of this fact can come from early industrialization, namely the Ford motor company, where Taylor’s system of a scientific approach was applied. Fredrick Taylor was interested in skill development by means of standardization and functional specialization. One worker would assemble the dashboard, another would assemble the wheels, and yet another would paint the exterior. The effects of the division of labour are well known and lead to Ford becoming not just the predominant car maker but also the inventor of the conveyer-belt production system- revolutionizing many industries.

However, one could argue that extremes of division of work could lead to undesired effects. Division of labour can ultimately reduce productivity and increase costs to produce units. Several reasons as causes for reduction in productivity can be thought of. For example, productivity can suffer when workers become bored with the constant repetition of a task. Additionally, productivity can be affected when workers lose pride in their work because they are not producing an entire product they can identify as their own work.

On the flipside, Douglas M. McGregor (1906 – 1964) cautioned that people would get bored doing the same job again and again. Repetition of same work bores people and kills enthusiasm. Fayol probably had recognized this fact earlier in his work. He stated that the division of work has its limits which experience and a sense of proportion teach us may not be exceeded. In more recent years management thinkers have recognized and addressed this issue more intensely.

Karl Marx (1818 -1883) warned that repetition of work leads to process of disaffection. In his view, workers would become more and more specialized, and work would become more and more repetitive, until eventually the workers would be completely estranged from the process of production. While it can have benefits on productivity, the specialization of labour can lead to workers with low overall skills and low enthusiasm.

Leo Tolstoy said that division of labor is a justification for sloth (laziness).

The idea of management is not new; managing is an inbuilt character of human beings. Early forms of management concepts have been applied throughout history in order to progress as a society. We see beautiful creation from Stone Age to civilization – could those creations such as monuments and cities be in place without management?  Management activities were always needed in order to complete massive projects.

The Industrial Revolution as well as the growth of factories and mass production created a need for strong management processes. Better and more efficient ways of manufacturing goods were needed in order to maximize productivity, bring down costs, and increase profitability. As a result, since the late 1800’s, theorists have developed a wide range of methods for improving management practices.

Scientific Theory by Frederick W. Taylor: (1890-1940): At the turn of the century, the most prominent and large organizations realized that besides routinely producing goods they require to go into depth of business processes. In the West the organizations give a lot of importance to scientific and technical matters, including careful measurement and specification of activities and results. Frederick Taylor developed the scientific management theory in 1911 which advocated efficiency by systematically improving the productivity of task completion by utilizing scientific, engineering, and mathematical analysis. The goal of scientific theory was to decrease waste, increase the process and methods of production, and create a just distribution of goods. The goal was to serve the common interests of employers, employees, and society. Taylor standardized the tasks as much as possible. Workers either got rewarded or punished as per their output. This approach appeared to work well for organizations with assembly lines and other mechanistic, routinized activities.

Frederick Winslow Taylor’s scientific management theory was devised form the point of view of industrial engineering that established the organization of work as in Ford’s assembly line.  A time-study department at Ford Motor Company had efficiency experts with stop watches working for studying the work process and eliminate wasteful motion. This study made some advances. But, then Ford managers came up with a revolutionary idea that represented the archetypal expression of scientific management. Instead of taking workers to the work, teams of workers going to work spots and building a car sequentially, this new model brought the work to the workers. In addition, this new paradigm broke the work process down into its smallest constituent parts. The assembly line, was inaugurated in 1913. It was a conveyor belt that steadily moved along a piece of the automobile while stationary workers repeatedly did one task adding an element to it. Tremendous gains in efficient labor were achieved. By regularizing and rationalizing the work process, and its minute division of labor, the production of an automobile, which before used to take some 12 hours per vehicle, now took only a bit over 90 minutes to completion. This discipline, along with the industrial psychology established by others at the Hawthorne Works of Western Electic in the 1920s, moved management theory from early time-and-motion studies to the latest total quality control ideas.

Taylor’s ideas, clearly articulated in his writings, were widely misinterpreted. Employers used time and motion studies simply to extract more work from employees at less pay. Unions condemned speedups and the lack of voice in their work that “Taylorism” gave them. Quality and productivity declined when his principles were simplistically instituted.

Administrative Theory by Henri Fayol (1841-1925) Henry Fayol was a French mining engineer who was also the director of mines. He developed a general theory of business administration that is often called Fayolism. He and his colleagues developed this theory.  Fayol is widely acknowledged as a founder of modern management methods. He coined fourteen principals of management as follows:

1. Division of work – The division of work is the course of tasks assigned to, and completed by, a group of workers in order to increase efficiency. Division of work, which is also known as division of labour, is the breaking down of a job so as to have a number of different tasks that make up the whole. This means that for every one job, there can be any number of processes that must occur for the job to be complete.
2. Authority and Responsibility – Authority is the right to give orders and obtain obedience, and responsibility is the consequence of authority. One cannot enjoy authority without being responsible for actions.
3. Discipline – Employees must obey and respect the rules that govern the organization. Good discipline is the result of effective leadership.
4. Unity of command – Every employee should receive orders from only one superior or behalf of the superior.
5. Unity of direction – Each group of organizational activities that have the same objective should be directed by one manager using one plan for achievement of one common goal.
6. Subordination – The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole.
7. Remuneration – All Workers must be paid a fair wage for their services.
8. Centralization – Centralization refers to the degree to which subordinates are involved in decision making.
9. Scalar chain – The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain.
10. Order – This principle is concerned with systematic arrangement of men, machine, material etc. there should be a specific place for every employee in an organization.
11. Equity – Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel – High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies in the organization.
13. Initiative – Employees who are allowed to originate and carry out plans will exert high levels of effort.
14. Esprit de corps – Promoting team spirit will build harmony and unity within the organization.

Bureaucratic Theory by Max Weber (1930-1950): Max Weber elaborated the scientific management theory further by adding flavor of his bureaucratic theory. Weber focused on dividing organizations into hierarchies, establishing strong lines of authority and control. His notion was that organizations must develop comprehensive and detailed standard operating procedures for all routinized tasks. In the late 1800s, Max Weber criticized organizations for running their businesses with their family members. Weber believed this informal organization of supervisors and employees inhibited the potential success of a company because power was misplaced in hands of those few who dint have the requisite experience. He felt that employees were loyal to their bosses and not to the organization. Weber believed in a more formalized, rigid structure of organization known as a bureaucracy. This non-personal view of organizations followed a formal structure where rules, formal legitimate authority and competence were characteristics of appropriate management practices. He believed that a supervisor’s power should be based on an individual’s position within the organization, his or her level of professional competence and the supervisor’s adherence to explicit rules and regulations.  Bureaucracy can best be defined as formal hierarchy and chain of command which distinguishes the level of authority within an organization.

Human Relations Theory by Elton Mayo: The Western Electric’s Hawthorne plant was located in Chicago. It had some 29,000 employees and it manufactured telephones and telephone equipment mainly for AT & T. The company was known for its advanced personnel policies. The company kept updating its policies at regular intervals and once welcomed a research study by the National Research Council to check the relationship between friendly work-place atmosphere and individual efficiency. The study began by Pennock and Clair Turner, in 1929 Turner invited Elton Mayo for his inputs on the study. Mayo indicated that the Test Room Workers had turned into a social unit, enjoyed all the attention they were getting, and had developed a sense of participation in the project.

In order to establish his premise Mayo instituted a series of interviews. These provided the workers with an opportunity to express their views and let off steam. It emerged that when people are distressed in a given situation and are given a chance to discuss, they feel better even if the situation does not change. The experiment also found that some complaints of workers had little or no basis, and they were stressed in their personal lives which was causing distress. By focusing on more informal and open conversation with workers and by empathetically listening to them Mayo had struck a key which linked the style of supervision and the level of morale to heightened levels of productivity.

Mayo was acclaimed by his followers as the Founder of the Human Relations (HR) as a branch of Management Studies,    while he was criticized by sociologists for not going far enough in his analysis. Do you know that the Hawthorne case stimulated ‘Organizational Behavior’ as subject?  And also gave birth to McGregor’s ‘Theory X and Theory Y’ and theory “Z” with its wider implications for leadership in organizations.

Systems Theory by Ludwig con Bertalanffy: Systems theory studies the structure and properties of systems in terms of relationships. It was established as a science by Ludwig von Bertalanffy, Anatol Rapoport, Kenneth E. Boulding, William Ross Ashby, Margaret Mead, Gregory Bateson and others in the 1950’s. Systems theory can be called a transdisciplinary study. It brings together theoretical principles and concepts from ontology, philosophy of science, physics, biology and engineering. Its applications are found in numerous other fields including geography, sociology, political science, organizational theory, management, psychotherapy and economics amongst others.

Karl Ludwig von Bertalanffy who was a Viennese professor of biology, worked very hard to identify structural, behavioral and developmental features common to particular classes of living organisms. One approach was to look over the empirical universe and pick out certain general phenomena which are found in many different disciplines, and to seek to build up general theoretical models relevant to these phenomena, e.g., growth, homeostasis, evolution. Another approach was to arrange the empirical fields in a hierarchy of complexity of organization of their basic ‘individuality’ or units of behavior, and to try to develop a level of abstraction appropriate to each. Examples are generalizations on the levels of cells, simple organs, open self-maintaining organisms, small groups of organisms, society and the universe. The latter approach implies a hierarchical “systems of systems” view of the world.

Bertalanffy’s ideas were developed into a General Systems Theory. He defined a general system as any theoretical system of interest to more than one discipline. This new vision of reality is based on awareness of the essential interrelatedness and inter-dependence of all phenomena – physical, biological, psychological, social and cultural. It transcends orthodox disciplinary and conceptual boundaries.

The systems view looks at the world in terms of relationships and integration. Systems are integrated whose properties cannot be reduced to those of smaller units. Instead of concentrating on basic building blocks or substances, the systems approach emphasizes the principles of organization. Every organism, from the smallest bacterium through the range of plant, animals and human beings – plus the family, society and the planet as whole – is an integrated whole and thus a living system.

In Bertalanffy’s view human survival is the paramount purpose for cultivating the uncommon sense of General Systems Theory. Our civilization is experiencing enormous difficulties due to lack of ethical, ethological and ecological criteria in the manifestation of human affairs, which are currently only concerned with the management of larger profits for a small minority of privileged humans. Bertalanffy believed that the need for a general systems consciousness was a matter of life and death, not just for ourselves but also for all future generations on our planet. He advocated a new global morality, an ethos which does not center on individual values alone, but on the adaptation of Mankind, as a global system, to its new environment. System’s theory brought in a paradigm shift in management thinking. Organizations don’t exist in vacuums, they have to be aware of their surrounding for their own existence.

X&Y Theory by Douglas McGregor: Theory X and Theory Y are theories of human motivation created and developed by social psychologist Douglas McGregor at the MIT Sloan School of Management in the 1960s that have been used in human resource management, organization behavior, organizational communication and organizational development. They describe two contrasting thinking of workforce motivation. Theory X and Theory Y represent the perceptions managers hold about their employees. It is not about their general behavior outside the work place, it pertains on their job, while working in the organization.

The ‘Theory X’ management assumes employees are inherently lazy and will avoid work if they can and that they inherently dislike work. As a result of this, management believes that workers need to be closely supervised and all-inclusive systems of controls be developed. It requires a hierarchical structure with narrow span of control at each and every level. According to this theory, employees will show little ambition without a tempting incentive program and will avoid responsibility whenever they can.

Theory Y is a participative style of management which assumes that people will exercise self-direction and self-control in achieving the organizational goals and objectives. It assumes that employees are committed to organization’s objectives. It is management’s main task in such a system to mold the employees and maximize their commitment.

This theory is useful in the Human Relations movement and training programs. It helps in understanding supervisory skills, delegating, career development, motivating, coaching, mentoring, etc.

Contingency Theory: A contingency theory is an organizational theory that claims that there is no best way to organize a corporation, to lead a company, or to make decisions. Instead, the optimal course of action is contingent (dependent) upon the internal and external situation. A contingent leader effectively applies his own style of leadership in the given situation. Basically, contingency theory asserts that when managers make a decision, they must take into account all aspects of the current situation and act on those aspects that are key to the situation at hand. Basically, it’s the approach that all factors are interdependent. For example, the continuing effort to identify the best leadership or management style might now conclude that the best style depends on the situation. Leadership style changes according to the institution; for example leadership in leading army troops is different than leadership in an educational institution, or leadership in a hospital than a leadership in a business organization. Some important factors for companies to decide contingencies are as below:

• Technology
• Suppliers and distributors
• Consumer interest groups
• Customers and competitors
• Government
• Unions