Fayol, taylor and the gilbreths presumed that managers were not overseeing manual labor tasks.

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Chapter 3 History, Globalization, and Values-Based

Leadership

WH AT ’S IN IT FOR ME?

Reading this chapter will help you do the following:

1. Learn about the history of principles of management.

2. Know the context for contemporary principles of management.

3. Understand key global trends.

4. See how globalization is affecting management principles and practices.

5. Appreciate the importance of value-based leadership (ethics) in management.

The planning-organizing-leading-controlling (P-O-L-C) framework is summarized in the following figure. In this chapter, you’ll learn that some principles of management are enduring, but you’ll also see that managers need to be continually adapting to changing times. Each facet of the framework—from planning, to organizing, to leading, to controlling—has to be adapted to take advantage of, and to manage in, our changing world. Global trends affect both the style and the substance of management. As the world becomes more global, managers find themselves leading workforces that may be distributed across the country—and the world. Workers are more educated, but more is expected of them.

Figure 3.2 The P-O-L-C Framework

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The realm of managers is expanding. As a leader, you’ll be a role model in the organization, setting the tone not just for what gets done but how it gets done. Increasingly, good business practice extends to stewardship, not just of the organization but of the environment and community at large. Ethics and values-based leadership aren’t just good ideas—they’re vital to attracting talent and retaining loyal customers and business partners.

3.1 Case in Point: Hanna Andersson Corporation Changes for Good

Figure 3.3

Source: Used by permission from Hanna Andersson Corporation.

Born from a desire to bring quality European-style children’s clothing to the United States, Hanna Andersson Corporation has sold colorful clothing and accessories since 1983. Husband and wife cofounders, Tom and Gun (pronounced “gōōn”) Denhart, started the Portland, Oregon–based company by distributing imported Swedish clothing from their home.

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Named for Gun’s Swedish grandmother, the company now boasts over $100 million in annual sales and employs over 500 people. Growing from an exclusive mail-order catalog business in the early 1980s, today Hanna Andersson also distributes products online, in 29 retail stores nationwide, and through select specialty retailers.

Over the years, Hanna Andersson has shown that it deeply values its employees. The company provides supplemental child-care reimbursement to all employees—even part-time sales associates. Additional employee benefits include part-time and flexible work hours, considerable paid time off, and 8 hours per year of paid time for employees to volunteer in the community. More important, though, employees feel like they are part of the Hanna Andersson family. In fact, in the beginning many of the employees were friends and family members of the Denharts.

It was important to the Denharts that they were involved in the decisions of the company and that those decisions took quality of life issues into account. Gun states, “If you can create balance among your work, your community, your family, and your friends, then you’re going to be more satisfied.” Examples of this philosophy infusing Hanna Andersson include the establishment of HannaDowns, a clothing recycling program where customers can return used clothing and receive a 20% off coupon for their next purchase. The charitable nature of Hanna Andersson has continued through what is now the HannaHelps program. This program awards grants and donates products to schools and nonprofit groups, helping children in the community and around the world. In addition, under Gun’s leadership Hanna Andersson established ongoing donations, 5% of pretax profits, to charities that benefit women and children.

The considerable growth and development the business experienced did not come without its challenges and necessary organizational change. In the 1990s and early 2000s, increased competition from other retailers and the introduction of online commerce posed some challenges for Hanna Andersson. The Denharts found themselves without a solid growth plan for the future. They worried that they might have lost sight of market forces. Change was necessary if Hanna Andersson was to remain viable.

Realizing the need for help and direction, the Denharts promoted from within the company to help initiate change and strategic growth, and in 1995, Phil Iosca took the strategic lead as CEO. Hanna Andersson was then sold to a private equity firm in 2001 and has since changed ownership

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several times, leading to a new business direction for the company. After selling the business, Gun remained on the Hanna board of directors until 2007. She also served as chair of the Hanna Andersson Children’s Foundation from 2001 to 2006. She still partners with the company from time to time on charitable events in the community.

Under Iosca’s steady leadership, the company opened several retail stores throughout the country in 2002 and established online commerce. In 2009, Hanna Andersson began distributing merchandise wholesale through retail partners such as Nordstrom and Costco. The implementation of each of these new distribution avenues required a great deal of change within the company. HR Vice President Gretchen Peterson explains, “The growth of the retail business required the greatest shift in our internal processes from both technical systems, to inventory planning and buying to distribution processes to our organizational communication and HR processes (recruitment, compensation, etc.), as well as our marketing communication programs.” Tenured employees throughout the company found themselves in unfamiliar territory, unsure of the company’s future as the board and owners debated the risks and rewards of retail expansion. Fortunately, the changes were mostly offset by a consistent leadership team. Petersen, who has been with the company since 1994, explains, “From 1995 to 2010, we retained the same CEO (Iosca) and therefore, the face of the company and the management style did not fluctuate greatly.”

When Iosca retired in early 2010, chief operating officer Adam Stone took over as CEO. He helped his company weather yet another transition with a calm push for changes within the company. To help understand different points of view at Hanna Andersson, Stone often sat in on inventory and operational planning meetings. Step by step, Stone was able to break down work initiatives so the continuing changes were not so overwhelming to the company and its valued employees. Over time, his and other company leaders’ presence has helped employees make better, more strategic decisions. Rather than resisting change, they now feel heard and understood.

The decision to sell wholesale turned out to be a good one, as it has enabled the company to weather the recession’s negative effect on retail and online purchases. Accounting for approximately 10% of total sales, the company’s wholesale business is expected to boost yearly revenue by 5%. With more conscientious inventory purchases and strategic distribution initiatives, Hanna Andersson has realized a higher sales volume, lower inventory at

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year-end, and less liquidation. Through it all, company management has done an effective job at interpreting the desired growth goals of its owners while inspiring change within the company. With continued clear communication, direction, and willingness to try new techniques, Hanna Andersson is poised for growth and success in the future while not forgetting to take care of its employees.

Primary Resource:

- Amy Wester, Talya Bauer, and Berrin Erdogan to accompany Carpenter, M., Bauer, T., & Erdogan, B. (2009). Principles of management (1st ed.). New York: Flat World Knowledge

Secondary Resources:

- D. (1996). Aiming higher: 25 stories of how companies prosper by combining sound management and social vision (pp. 23–35). New York: The Business Enterprise Trust; Boulé, M. (2009, July 16).

- “Hanna Andersson employee can’t say enough of a thank-you to co-workers who helped her through cancer.” Oregonian. Retrieved March 4, 2010, from http://www.oregonlive.com/news/oregonian/margie_boule/index.ssf/2009/07/hanna_anderss on_employee_cant.html

- Information retrieved February 28, 2010, from the Hanna Andersson Web site: http://www.hannaandersson.com

- Muoio, A. (1998, November 30). Giving back. Fast Company. Retrieved March 1, 2010, from http://www.fastcompany.com/magazine/20/one.html?page=0%2C1

- Goldfield, R. (2002, June 14). Hanna sees bricks-and-mortar future. Portland Business Journal; Peterson, G. (2010, March 5 and April 5). Personal communication; Information retrieved March 1, 2010, from http://www.answers.com/topic/hanna-andersson

- Raphel, M., & Raphel, N. (1995). Up the loyalty ladder (pp. 83–90). New York: HarperCollins.

D ISCUSSION QUESTIONS

 How has Hanna Andersson applied values-based leadership in terms of the organization’s choices related to P-O-L-C?

 How did company leaders like Iosca, Petersen, and Stone help facilitate change within the company? Did they remain consistent with the values of the founders?

 What were the reasons for organizational change within Hanna Andersson, both internally and externally?

 What unique challenges do family-owned and -operated businesses face?

 How did the mission of Hanna Andersson evolve over time?

http://www.oregonlive.com/news/oregonian/margie_boule/index.ssf/2009/07/hanna_andersson_employee_cant.html

http://www.oregonlive.com/news/oregonian/margie_boule/index.ssf/2009/07/hanna_andersson_employee_cant.html

http://www.hannaandersson.com/

http://www.fastcompany.com/magazine/20/one.html?page=0%2C1

http://www.answers.com/topic/hanna-andersson

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3.2 Ancient History: Management Through the 1990s

LEARNING OBJ ECTIVES

1. Early motivation for development of principles. 2. What problems did these principles solve? 3. What were the limitations of these early views?

Early Management Principles

Early management principles were born of necessity. The most influential of these early principles were set forth by Henri Fayol a French mining engineer. In 1888, Fayol became director of a mining company. The company was in difficulty, but Fayol was able to turn it around and make the company profitable again. When he retired, Fayol wrote down what he’d done to save the company. He helped develop an “administrative science” and developed principles that he thought all organizations should follow if they were to run properly.

Fayol’s 14 Principles of Management

1. Specialization/Division of Labor – By specializing in a limited set of activities, workers become more efficient and increase their output.

2. Authority/Responsibility
– Managers must have the authority to issue commands, but with that authority comes the responsibility to ensure that the work gets done.

3. Discipline
– Workers must obey orders if the business is to run smoothly. But good discipline is the result of effective leadership: workers must understand the rules and management should use penalties judiciously if workers violate the rules.

4. Unity of Command
– An employee should receive orders only from one boss to avoid conflicting instructions.

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5. Unity of Direction
– Each unit or group has only one boss and follows one plan so that work is coordinated.

6. Subordination of Individual Interest
– The interests of one person should never take precedence over what is best for the company as a whole.

7. Remuneration
– Workers must be fairly paid for their services.

8. Centralization
– Centralization refers to decision making: specifically, whether decisions are centralized (made by management) or decentralized (made by employees). Fayol believed that whether a company should centralize or decentralize its decision making depended on the company’s situation and the quality of its workers.

9. Line of Authority
– The line of authority moves from top management down to the lowest ranks. This hierarchy is necessary for unity of command, but communication can also occur laterally if the bosses are kept aware of it. The line should not be overextended or have too many levels.

10. Order
– Orderliness refers both to the environment and materials as well as to the policies and rules. People and materials should be in the right place at the right time.

11. Equity
– Fairness (equity), dignity, and respect should pervade the organization. Bosses must treat employees well, with a “combination of kindliness and justice.”

12. Stability of Tenure
– Organizations do best when tenure is high (i.e., turnover is low). People need time to learn their jobs, and stability promotes loyalty. High employee turnover is inefficient.

13. Initiative
– Allowing everyone in the organization the right to create plans and carry them out will make them more enthusiastic and will encourage them to work harder.

14. Esprit de Corps
– Harmony and team spirit across the organization builds morale and unity.

Time and Motion

Frederick Winslow Taylor, a contemporary of Fayol’s, formalized the principles of scientific management in his 1911 book, The Principles of Scientific Management. Taylor described how productivity could be greatly improved by applying the scientific method to management; for this

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reason, the scientific approach is sometimes referred to as Taylorism.

Taylor is most famous for his “time studies,” in which he used a stopwatch to time how long it took a worker to perform a task, such as shoveling coal or moving heavy loads. Then he experimented with different ways to do the tasks to save time. Sometimes the improvement came from better tools. For example, Taylor devised the “science of shoveling,” in which he conducted time studies to determine how much weight a worker could lift with a shovel without tiring. He determined that 21 pounds was the optimal weight. But since the employer expected each worker to bring his own shovel, and there were different materials to be shoveled on the job, it was hard to ensure that 21-pound optimum. So, Taylor provided workers with the optimal shovel for each density of materials, like coal, dirt, snow, and so on. With these optimal shovels, workers became three or four times more productive, and they were rewarded with pay increases.

Frank Gilbreth and Lillian Moller Gilbreth, his wife (who outlived Frank by 48 years!), were associates of Taylor and were likewise interested in standardization of work to improve productivity. Retrieved January 28, 2009, from http://en.wikipedia.org/wiki/Cheaper_by_the_Dozen. Cheaper by the Dozen was made into a 1950 motion picture starring Clifton Webb and Myrna Loy as Frank and Lillian Gilbreth. They went one better on Taylor’s time studies, devising “motion studies” by photographing the individual movements of each worker (they attached lights to workers’ hands and photographed their motions at slow speeds). The Gilbreths then carefully analyzed the motions and removed unnecessary ones. These motion studies were preceded by timing each task, so the studies were called “time and motion studies.”

Applying time and motion studies to bricklaying, for example, the Gilbreths devised a way for workers to lay bricks that eliminated wasted motion and raised their productivity from 1,000 bricks per day to 2,700 bricks per day. Frank Gilbreth applied the same technique to personal tasks, like coming up with “the best way to get dressed in the morning.” He suggested the best way to button the waistcoat, for example, was from bottom up rather than top down. Why? Because then a man could straighten his tie in the same motion, rather than having to raise his hands back up from the bottom of the waistcoat.

Limitations of the Early Views

http://en.wikipedia.org/wiki/Cheaper_by_the_Dozen

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Fayol, Taylor, and the Gilbreths all addressed productivity improvement and how to run an organization smoothly. But those views presumed that managers were overseeing manual labor tasks. As work began to require less manual labor and more knowledge work, the principles they had developed became less effective. Worse, the principles of Taylorism tended to dehumanize workers. The writer Upton Sinclair who raised awareness of deplorable working conditions in the meatpacking industry in his 1906 book, The Jungle, was one of Taylor’s vocal critics. Sinclair pointed out the relatively small increase in pay (61%) that workers received compared with their increased productivity (362%). Frederick Taylor answered Sinclair’s criticism, saying that workers should not get the full benefit because it was management that devised and taught the workers to produce more. But Taylor’s own words compare workers to beasts of burden: The worker is “not an extraordinary man difficult to find; he is merely a man more or less the type of an ox, heavy both mentally and physically.”