Week 1 or 2: Day 3
Evolution of Modern Management

 

Depending on scheduling of the Internet Lab, this material may be introduced in Week 1 or 2.

The module on the evolution of modern management briefly traces the development of Western commerce, capitalism, and eventually, "management" from the ancients to the 20th century. While most textbooks begin management history with Frederick Taylor, the professor believes that the student needs a broader perspective and, at least, a casual interpretation to the development of capitalism, especially in America, to appreciate the unique evolution of "management", professional managers, and the business school in this country. The intent is to demonstrate that "management" is defined in the business context and to provide the student with the rudiments of an historical perspective on "business" and its creation, "management". This module will span Week 2 and the material will cover Teaching Note 1 through the Reformation.

 

The objectives are that the student will:

1. Define "management" in the modern business context;

2. Appreciate the development of commerce and state economy

3. Understand the principles of mercantilism;

4. Know who Max Weber is and form an opinion as to the role of values in transforming economies.

 

OUTLINE

(Read the Full Text Teaching Note)

 I. History of Management

A. Definition of "management": Typical Textbook Approaches emphasize social relations:

1. Early Textbooks: "planning, organizing, directing, coordination, and controlling"

2. Also, Koontz & O'Donnell: "the function of getting things done though others

B. Drucker: management is an economic activity by which resources are used to create wealth

C. The economic versus management approach to wealth creation:

1. Economics.-

a. Market allocates resources through price mechanism

(1) Scarce goods = high prices; market discourages buying of scarce goods

(2) Scarce goods - higher than normal profits; market encourages firms to produce scarce goods

b. In economics there is no role for management- the market allocates resources efficiently

(1) As market seeks equilibrium, there is no surplus profits over long-term

(2) How can we explain profit-making or wealth creation with market model?

c. Economics is the view of business activity from afar - the "market" perspective

 

2. Management assumes that we can "beat the market", make profits over the long term, "win", and create wealth.

a. Management: Wealth is created through collaboration of people and technology

b. Economy and markets (competitors), in management, are only part of the external forces or constraints in which management attempts to create wealth.

3. Management, like economics, is a formal business discipline - it is taught and researched.

4. Management is something people do and it is a "profession", meaning there is a formal education which is normally a prerequisite to its practice.

5. Management is popular world-wide in business, government, and non-profit organizations simply because it has been successful (Drucker).

 

II. Pre-Industrial "Management"

A. "Managing" has been the domain of rulers and of generals.

1. Ancient China and Early Roman Empire - rise of state civil service for governance

2. Nicollo Machiavelli's The Prince - and early treatise on governing in which "the end justifies the means"

B. Commerce not a consideration in pre-industrial society - not a role for aristocracy and a threat to the state

1. Capital controlled by the state

2. Society is agrarian - dependent upon food production, not manufactured goods

 

III. The Renaissance and Reformation: Rise of Nation-State and Mercantilism

A. European commerce is developed through contact with Islam in Crusades.

1. Islamic contributions: mercantilism - earliest form of capitalism in which trader "buys low and sells high"

2. Marco Polo's opening of Eastern trade leads to early capitalism in Italian city-states

a. putting out system - merchant obtains raw materials and farms out production of goods to families for a wage

b. Lica Paciolo - early form of double entry bookkeeping developed in 1494 for commerce

B. Mercantilism as state capitalism defined:

1. Bullionism - The economic well-being of a nation is measured by possession of precious metals, especially gold or silver. The rise of a money economy, the stimulation produced by the influx of bullion from America, the fact that taxes were collected in money, all seemed to support the view that hard money was the source of prosperity, prestige, and strength.

2. Favorable balance of trade - For a nation to have more bullion, it must export more than it imports. Imports are an outflow of wealth. Exports are an inflow of wealth.

3. Economic self-sufficiency - To reduce the outflow of wealth, the state should encourage domestic industrial development and discourage imports.

4. Agriculture is the basis of national wealth. Because most consumption is food, domestic agriculture should be encouraged. This limits dependence of foreigners and increases the local tax base.

5. Tariffs - To reduce dependence of foreign materials, tariffs should be high on imported manufactured goods, but low on imported raw materials.

6. National Power - Great nations are Sea powers with colonies. Colonies provide captive markets for manufactured goods and sources of raw material. For many European nations, colonies are the direct source of gold and silver, national wealth.

7. Economic development is a government function: to enforce economic and trade policies, protect and accrue national wealth.