Principles and Practices of Management II: The Behavioural, Systems, Quantitative and Contingency Approaches, and the Functions of Management — Planning and Decision Making, Organising, Staffing, Directing, Controlling and Coordinating

The behavioural approach (from the 1940s and 1950s) kept the human-relations school's interest in people but replaced its sentiment with the methods of psychology, sociology and anthropology. It asked why people behave as they do at work and tested the answers. Abraham Maslow's hierarchy of needs (1943), Douglas McGregor's Theory X and Theory Y (The Human Side of Enterprise, 1960), Frederick Herzberg's motivation–hygiene theory (1959), Rensis Likert's four systems of management (from exploitative-authoritative to participative group; New Patterns of Management, 1961, and The Human Organization, 1967), Chris Argyris's immaturity–maturity continuum (Personality and Organization, 1957) and Herbert Simon's bounded rationality (Administrative Behavior, 1947) all belong here. The approach made the individual, the group and the leader objects of study and so created organisational behaviour, taken in Unit IV.

The systems approach borrows from Ludwig von Bertalanffy's general systems theory. A system is a set of interrelated parts forming a whole; a closed system ignores its environment, while an open system takes in inputs (people, materials, capital, information), transforms them and returns outputs (goods, services, wages, satisfaction, pollution) to the environment, and uses feedback to adjust. Daniel Katz and Robert Kahn's The Social Psychology of Organizations (1966) is the classic statement of the organisation as an open system. Key ideas are synergy (the whole is more than the sum of its parts), subsystems and their interdependence, boundaries, entropy (the tendency of a closed system to run down) and equifinality (the same end can be reached by different paths). The Tavistock Institute's socio-technical systems studies of British coal-mining (Eric Trist and Ken Bamforth, 1951) showed that the technical and social systems of work must be designed together, a finding with direct meaning for labour: the longwall method broke up self-regulating work groups and raised absenteeism.

The quantitative (management science) approach grew from the operations research teams of the Second World War, which applied mathematics to convoys, radar and logistics. It treats management decisions as problems to be modelled: linear programming for allocating scarce resources, queuing theory for waiting lines, inventory models, simulation, network techniques such as PERT and CPM, decision trees and game theory. Its strength is rigour in structured problems; its limit is that the human and political parts of a decision rarely fit a model. Management information systems and today's HR analytics are its descendants.

The contingency (situational) approach, dominant from the 1960s, holds that there is no one best way to organise or manage: the right structure or style depends on the situation, and the manager's task is to diagnose the situation and fit the response to it ("if–then" management). Its evidence came from comparative field studies. Tom Burns and G. M. Stalker (The Management of Innovation, 1961) found that firms in stable environments did well with mechanistic structures (rigid hierarchy, precise job definitions, vertical communication) while firms in changing environments needed organic structures (fluid roles, lateral communication, expertise over rank). Joan Woodward's study of about a hundred firms in south Essex (Industrial Organization: Theory and Practice, 1965) linked successful structure to production technology: unit and small-batch, large-batch and mass, and process production. Paul Lawrence and Jay Lorsch (Organization and Environment, 1967) showed that the more uncertain the environment, the more a firm must differentiate its departments and the more effort it must spend integrating them. Fred Fiedler's contingency model of leadership (1967) applied the same logic to leaders.

Planning is deciding in advance what to do, how, when and by whom; it bridges where the organisation is and where it wants to be, and Koontz and O'Donnell called it the primary function because every other function carries out plans. Plans form a hierarchy from purpose or mission, objectives and strategies through policies (general guides to thinking, such as a promotion-from-within policy), procedures (chronological steps, such as the grievance procedure), rules (a required action with no discretion, such as "no smoking in the paint shop"), programmes and budgets (plans in numbers). Standing plans (policies, procedures, rules) are used repeatedly; single-use plans (programmes, projects, budgets) are used once. Planning may be strategic (long-term, by top management), tactical (medium-term, by middle management) or operational (short-term, on the shop floor). Management by objectives, set out by Peter Drucker in The Practice of Management (1954), joins planning to appraisal: superior and subordinate agree objectives, review progress and appraise results against them.

Decision making is choosing a course of action from alternatives, and Herbert Simon made it the heart of administration. His model has three phases: intelligence (finding the occasion for a decision), design (inventing and analysing possible courses of action) and choice (selecting one). Against the classical "economic man" who maximises with full information, Simon described "administrative man" who works under bounded rationality (limited information, time and capacity to calculate) and therefore satisfices, accepting the first alternative that is good enough. Decisions are programmed (routine, repetitive, handled by standing procedures, such as sanctioning casual leave) or non-programmed (novel and unstructured, such as responding to a strike or closing a plant). Group techniques include brainstorming, the nominal group technique and the Delphi technique, a series of anonymous rounds of expert opinion developed at the RAND Corporation and used in manpower forecasting.

Organising is grouping activities, assigning them to positions and establishing relationships of authority and responsibility. Its building blocks are departmentation (by function, product, territory, customer, process or time), span of control (the number of subordinates a manager can supervise effectively; V. A. Graicunas showed in 1933 that the possible relationships rise far faster than the number of subordinates), delegation (authority passed down, while ultimate responsibility cannot be delegated), and the balance of centralisation and decentralisation. Structures range from line (a direct chain of command) and line-and-staff (with advisory specialists, of whom the personnel department is the classic case) to functional, divisional, matrix and network forms. A tall structure has many levels and narrow spans; a flat one has few levels and wide spans.

Staffing is filling and keeping filled the positions in the structure: manpower planning, recruitment, selection, placement, training, appraisal, compensation and promotion. Harold Koontz and Cyril O'Donnell listed it as a separate managerial function (planning, organising, staffing, directing, controlling), where Fayol had folded it into organising, and it is the function that Units II and III of this syllabus unfold. Directing (Fayol's "command", later also called leading or actuating) is guiding and motivating people towards objectives, and has four elements: supervision, motivation, leadership and communication. Luther Gulick's POSDCORB (1937) is the most quoted acronym of the functions: Planning, Organising, Staffing, Directing, Coordinating, Reporting and Budgeting.

Controlling is measuring performance against plans and correcting deviations. The process has four steps: establishing standards, measuring actual performance, comparing performance with the standard, and taking corrective action. Control can be feedforward (anticipating problems before the activity, such as screening applicants or inspecting raw material), concurrent (during the activity, such as direct supervision) or feedback (after the activity, such as monthly absenteeism reports or a performance appraisal). Techniques include budgetary control, standard costing, break-even analysis, statistical quality control, PERT and CPM, management audit and, for people, personnel records, labour turnover and absenteeism rates and HR audit. Management by exception reports only significant deviations to the manager.

Coordinating is the integration of the activities of separate units so that they pull towards common objectives. Fayol listed it as an element of management; Koontz and O'Donnell called it "the essence of management", achieved through all the other functions rather than a separate function of its own. Coordination may be internal or external, vertical (between levels) or horizontal (between departments), and is achieved through the hierarchy, rules and procedures, committees, liaison roles, meetings, and above all through communication. Follett's four principles (direct contact, early stages, reciprocal relating and continuity) remain the standard account of how to achieve it.