Thesis on "Management Theories Are They Different and Do They Work"

Thesis 15 pages (5125 words) Sources: 6

[EXCERPT] . . . .

Management Theories

Over the last several decades a number of different management theories have emerged. This is in response to the changing nature of business, where many organizations that were once the pinnacle of their industry face number of long-term issues. These different issues can take a profitable company and over the course of time work like a cancer. As it will slowly eat away at the culture, profitability and competitive advantages that a company once had. This can cause many organizations to fall into the precarious situation of seeing a sizeable decline in market share. Once this occurs, many in management will often wonder how their organization was able to find themselves in such a situation. Where, their once loyal customers will begin utilizing the products or services of their competitors. This is because, management lost focus on effectively increasing productivity, maintaining high standards of quality and ensuring that prices for various products remain competitive. A good example of this can be seen by looking no further than General Motors. Where, the company was considered to be the largest automobile manufacturer in world. Then, as the market conditions changed, management continued to embrace the policies of the past. As they would payout high amounts of dividends to shareholders, while maintaining their traditional pension / benefits plan for employees. At the same time, management was not anticipating a shift in the marketplace. Once this occurred, it meant that it would only be matter of time until the company would face a number of different financial challenges. Part of the reason for this was because management was not providing leadership on a number of different issues. (Bissonette, 2008) This is because the overall philosophy of management theory that they were using, allowed managers and executives to live under the delusion that everything was going to be fine. In order to effectively adapt to a world that is increasingly becoming more competitive, requires that all managers use strategies that will allow their company to adapt to what is occurring. This means that a variety of different management theories must be examined to determine which one would work best for the various challenges encountered. It is through comparing these different theories; that will provide the greatest insights as to how a company can adapt with the changes that are occurring in the world of business.

Contingency Theory

The contingency theory is when managers believe that using flexibility is best way that an organization should be structured. Where, you are using the different strengths of a particular manager to address a particular challenge. Then, when a different situation emerges, the organization will use the talents of another manager, to effectively grapple with that situation. Ultimately, this theory is supposed to be able to help an entity be able to deal with the various internal / external challenges. Where, it works well for those organizations that are small, with the managers / owners having more direct control of the production process. There are four basic ideas that are stressed under this theory to include: the design of any kind of subsystems must have the flexibility to adapt to this theory, there is no right way to manage, any kind of subsystems used must work well with each other and flexibility must be applied to ensure that you are using the different strengths of each manager effectively. In general, this theory would work well with those organizations that have a number of different products / services that they are producing out of one location. Where, flexibility must be consistently applied to deal with the various situations that will arise during the course of conducting business. For example, a small manufacturing company has four different lines of paint sprays that they are producing. Each one of the specifications and intended uses are different, as the company is marketing each of the different products to specific markets / customers. In this a particular case, the contingency management theory would work well because managers can adapt to changes quickly in the production. Where, the company could be producing large amounts of paint sprayers that will be sold through retail outlets to consumers. Then, once the economy slows they receive a large government contract for industrial paint sprayers. Since, the specifications are different, means that different managers would be more suited to dealing with the various issues that arise with this product. Therefore, the company will use a system that will work off of the knowledge and strengths of each manager for the different products offered (the contingency theory). (Martin, n.d.)

Like what was state previously, the contingency theory works well for those organizations that are smaller. In addition to helping to improve the production process, this theory also allows managers / owners to be able to most effectively deal with changes that are taking place outside of the business. Where, organizations will have to wrestle with the changing business / economic condition from: globalization, a more diverse work place, local laws / regulations and various customs / values of a particular area. Together, these different elements can allow smaller organizations to more effectively deal with the various challenges that are constantly occurring. ("Contingency Theory," 2010)

However, there are number of different weaknesses that the contingency theory has to include: it only works for organizations of a particular size, if there are differences between divisions / suppliers this could slow production and the overall assumptions made about employees. This theory has been applied to a variety of different organizations, which vary in size. What happens is some of the large entities have tried using either: a particular aspect of this theory or the theory itself. The problem when using such a system is: it requires managers to use common sense, to determine the most appropriate course of action. When a large entity uses this system there will be confusion between the different departments and mangers. As, the overall areas of responsibility become rather confusing. ("Contingency Theory," 2010) Once this takes place, it is only a matter of time until production falls as miscommunications have been known to occur. A good example of this would be with Enron, where the company relied on a more formal structure of giving managers in the field more flexibility. The problem with this kind of thinking is that many of these managers would convince upper management to go into deals that were not economically viable. As a result, many of the doomed projects that contributed to the company's downfall were based upon observations of what regional managers wanted. This was problematic because it did not take into account the financial viability of the company by engaging in such projects. Where, the former CFO Andrew Fastow admitted that some of these deals (such as the Cuiaba Integrated Project in southwestern Brazil) were very risky. With Fastow saying, "I did not want to own the Cuiaba power plant. I think (calling it) a very risky is an understatement." (Babineck, 2006) This is significant because it underscores the differences in philosophy between the CFO and the field managers. Where, they would see one particular aspect of a situation from their perspective. This is because the company did not provide them with a more formalized management structure, which meant that they would make stupid recommendations to headquarters. Instead of ignoring these different ideas, the upper management was influenced by them in such a way, that they would override concerns of the CFO. Over the course of time, one could infer that this in formalized structure, helped perpetuate the off the book partnerships that were used to hide the massive losses of the company.

When looking at the second weakness of this theory, if there are differences between divisions / suppliers this could slow production, it clear that increased amounts of flexibility under this theory can lead to communication problems. This is because the managers are given more flexibility, which means that the various divisions throughout the company will operate independently. Where, there could be difference in the various policies / procedures for different departments or between suppliers. Once this occurs, it could mean delays in receiving various components or the cooperation of other divisions / suppliers. This could become more challenging, as the various entities will have trouble communicating with each other. Over the course of time, this could cause productivity to decrease, as the various communication issues lead to divisions not receiving the resources or support, they require to achieve their objectives. ("Contingency Theory," 2010)

The third weakness with the contingency theory is that, it makes generalizations about employees. This means that a number of different tools and tactics must be used to ensure high levels of productivity. When you are using this theory, you are assuming that everyone responds to increased amounts of flexibility in the work place. However, the problem begins with this generalization that everyone will respond well to such a management structure. When in reality, there will be a percentage of productive employees that… READ MORE

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