Chapter 2 · A Short History of Management Theory and Practice

Chapter 2 · A Short History of Management Theory and Practice

The central idea

Management is socially constructed: its meanings, assumptions, and acceptable practices are created and sustained by people in particular settings. A practice that seems natural today may have been unusual historically and may change again. This chapter connects five pre-contemporary eras to six contemporary eras and explains how their assumptions relate to FBL, TBL, and SET. Dates mark the text's simplified teaching framework; eras overlap, and later emphases do not erase earlier functions.

2.0–2.1 · Chocolate and the social construction of reality

The chocolate case demonstrates changing meanings rather than a single inevitable business purpose. Cocoa has served as a sacred object, currency, supposed medicine, a vehicle for social improvement, a mass-market commodity, and a means of farmer empowerment. These meanings reflect beliefs, institutions, technology, power, and organizational design.

Cadbury's Bournville illustrates concern for worker and community well-being through better workplace arrangements, education, healthcare, and housing. Industrial technologies such as the cocoa press made chocolate more accessible and supported large-scale production. As the industry concentrated, large buyers gained power relative to small farmers, raising concerns about low incomes, labor conditions, and child labor. Adopting some TBL practices does not establish that those underlying problems disappear.

Divine Chocolate illustrates a different organizational arrangement: producer ownership and representation, fair purchasing prices, and community benefits. Its co-owner, Kuapa Kokoo, is a farmer cooperative. A cooperative is owned and democratically governed by its members. Giving producers a voice and a stake changes how benefits and power are distributed. The case relates to SET because the social mission shapes the business, rather than merely supplementing a profit target. Use these firms as dated textbook examples, not as automatically fixed classifications for all future decisions.

The social construction of reality occurs when people treat a human-created meaning as objective and let it shape their actions. Money works because people accept shared meanings about exchange and value; it has no organizational power independent of those shared arrangements. Similarly, “good management” reflects assumptions about what outcomes matter. Social construction does not mean that nothing is real or that ecological limits can be wished away. It means that many institutions, expectations, and meanings depend on human agreement and repetition.

Every way of seeing management emphasizes some concerns and de-emphasizes others. A model centered on maximizing profit can push other well-being into a secondary position. A model centered on socio-ecological flourishing cannot simultaneously make unlimited profit maximization its overriding goal. Studying history makes these choices visible and supports deliberate participation in shaping future management.

2.2 · Five pre-contemporary eras

2.2.1 · Pre-humankind: ecological foundations

The cosmic calendar compresses the universe's history into one year to show how recent humans are. In the chapter's illustration, the Big Bang is January 1; Earth forms September 14; early life appears September 25; animals appear December 21; dinosaurs occupy December 25–30; Homo sapiens appear at 11:53 p.m. on December 31; agriculture arrives around 11:59:30 p.m.; and Aristotle/the Roman Empire appear around 11:59:53 p.m. These are illustrative dates tied to the source's timescale, not calendar dates for actual events.

Three ecological foundations are especially important: solar energy supports life processes; carbon is a building block throughout living systems; and phytoplankton support aquatic food webs, produce oxygen, and participate in carbon cycles. The managerial implication is dependence: nature supplies the conditions for human society and economic activity. Describing resources as human property does not remove this ecological dependence. This argument fits SET's embedded view of the economy within society and nature.

2.2.2 · Hunting and gathering: relationships and natural rhythms

Symbolic thought and communication enabled people to coordinate and pass knowledge across generations. Nomadic clans worked within seasonal and ecological rhythms, with relatively simple structures and considerable shared work. The text uses the San people as an illustrative comparison, not as proof that every historical foraging community was identical.

Table 2.2 contrasts sharing and other-regarding values with financial self-interest; status through giving with status through accumulation; no central role for money with money-mediated markets; shared clan membership with competing firms; kinship ties with formal contracts; small clans with widely varying organizational sizes; little task specialization with extensive division of labor; moving to another ecological niche with organizational failure; informal participatory leadership with managerial hierarchy; egalitarian norms with differentiated rewards; and a shorter illustrative workweek with the typical modern workweek.

The conceptual point is that materialism, hierarchy, and financial competition are not the only imaginable ways to organize. The table's historical/generalized contrasts should not be treated as universal descriptions of all Indigenous peoples or all contemporary firms.

2.2.3 · Agriculture: settlement, surplus, and hierarchy

Domestication of plants and animals allowed more stable settlements. Reduced time needed for foraging supported cultural development and new institutions. Surplus enabled specialization and trade; property claims and accumulated wealth contributed to differentiated social classes. Protection or seizure of resources encouraged military organization. Coordinating specialized tasks, resources, settlements, and trade increased the need for management. Agriculture therefore changed both productive possibilities and social power.

2.2.4 · Money: sustenance versus accumulation

The chapter introduces Aristotle's distinction between natural management of money and unnatural management of money. Natural management uses money to exchange valued goods in ways that sustain community, associated with sustenance economics and true wealth. A tomato grower selling produce to buy needed sandals illustrates exchange supporting needs and useful production.

Unnatural management uses money to make more money for its own sake, associated with acquisitive economics and spurious wealth in Aristotle's critique. Buying tomatoes purely to resell them at a higher price illustrates his concern when no additional useful good or service is created. He also criticized monopoly and competitive advantage used primarily for accumulation. Needs-based exchange has stopping points, such as enough food; money accumulation has no inherent endpoint. The contrast concerns purpose and contribution, not merely whether a transaction uses money. Increased exchange and financial wealth also increased demand for professional management.

2.2.5–2.2.6 · Capitalism, industrialization, and corporations

Capitalism rewards entrepreneurs for profitably combining resources to produce valued goods and services. Earlier economic systems often relied on reciprocity (mutual exchange and neighborliness), redistribution (collecting and reallocating resources so people have enough), and householding (stewardship for a household or community).

Max Weber argued that the European religious Reformation helped legitimate materialism—high value placed on possessions, financial well-being, and productivity—and individualism—high value placed on individual interests. Wealth could be understood as a blessing, while personal calling received greater emphasis. Coupled with Adam Smith's invisible hand, these changes helped establish FBL assumptions and entrepreneurial activity.

The Industrial Revolution combined factories, machinery, fossil-fuel energy, supporting finance, and expanded trade. Specialization/division of labor increased output by dividing work into repeated tasks. Adam Smith's pin-factory illustration demonstrates this principle; the exam-relevant idea is how task specialization and coordinated production increase productivity. Growth also changed jobs, organizational size, international relationships, and power.

A corporation is a legal entity separate from its owners. Limited liability generally limits owners' financial exposure to their investment under that legal arrangement. Early corporate charters were often restricted to major public projects. The text describes worries that corporate power could shape public opinion, politics, and democratic institutions. Increasing corporate prevalence is therefore also a change in society's distribution of power.

By the beginning of contemporary management studies, several socially constructed assumptions were established: private ownership of resources; praise for making money from money; claims that materialism and individualism are natural; preference for capitalism; and reliance on large profit-maximizing corporations. These were historically developed assumptions, not timeless facts. SET challenges their inevitability and priority.

2.3 · Six contemporary eras

The first four eras mostly developed within FBL assumptions. Their dominant order is organizing → leading → planning → controlling. This chronological order differs from the usual function list planning → organizing → leading → controlling. Both are correct for their respective questions.

2.3.1 · Classical: technical design of work and organizations

Scientific management has a micro focus on specific jobs: analyze methods, select appropriate workers, train them, and design rewards to improve productivity. Frederick W. Taylor sought systematic job design. His shoveling example shows adapting tools to materials instead of requiring each worker to supply one generic shovel. Improved productivity and wages illustrate the intended efficiency benefit.

Henry Gantt developed the Gantt chart, which shows work stages across time, supporting schedules, deadlines, resource allocation, and progress monitoring. Frank B. Gilbreth developed time and motion studies to examine task movements and identify more efficient ways of working. His bricklaying analysis illustrates eliminating unnecessary motions.

Bureaucratic organizing has a macro focus on how jobs fit together. Max Weber described impersonal, formally rational organization through rules, records, competence, and defined authority/responsibility. Compared with favoritism toward relatives or friends, merit and rules can improve consistency. Henri Fayol's administrative management includes unity of command (one immediate superior for each employee) and the scalar chain (clear authority running through the hierarchy). Scientific management, bureaucracy, and administrative principles are related but distinct contributions.

2.3.2 · Human relations: the people side

Mary Parker Follett argued that influence should flow to those with relevant expertise, and that managers should facilitate work rather than dominate it. She viewed organizations as communities and emphasized empowerment, constructive conflict resolution, and fluid authority appropriate to the situation.

Lillian Gilbreth contributed to reducing job stress, humane work arrangements, child-labor protections, and safer conditions. Chester Barnard emphasized leadership and the informal organization: relationships, social groups, and cliques operating alongside formal structures.

The Hawthorne studies, associated with Elton Mayo and Fritz Roethlisberger, examined lighting and productivity but found changes that could not simply be attributed to illumination. The chapter's Hawthorne effect is the idea that special attention or awareness of being observed can influence behavior. It is not proof that all lighting changes are irrelevant, that attention always increases productivity, or that every observed change has one cause. The studies helped direct attention toward social factors.

The human relations movement sought worker satisfaction as a route to productivity through social skills and more humane jobs. Douglas McGregor's Theory X describes managerial assumptions that workers dislike work, avoid responsibility, and require pressure or close control. Theory Y assumes work can be natural, people can be motivated and responsible, and enabling structures help them contribute. These are assumptions guiding management, not permanent labels for two kinds of employees. Theory Y practices include support, participation, teams, development, and appropriate autonomy.

2.3.3 · Calculating: quantitative planning and fit

Wartime coordination and problem solving helped develop quantitative tools later applied to business. Management science uses mathematics, statistics, and quantitative methods. Operations research emphasizes model building to explain or predict outcomes; operations management uses quantitative techniques to improve production decisions.

Tools include break-even analysis (sales/prices needed to cover costs), forecasting (future demand or production), inventory modeling (ordering quantities and timing), linear programming (allocate scarce resources among competing uses), and simulation (explore outcomes of alternative decisions). The chapter introduces their purposes rather than prescribing a full calculation method for every tool.

The systems approach examines interconnected elements. A closed system concentrates on internal activities as if the organization were self-sufficient. An open system recognizes inputs from, outputs to, and dependence on the environment. A restaurant's suppliers, labor market, and customers matter alongside its kitchen procedures.

Synergy occurs when joint performance exceeds the sum of separate contributions. Entropy is the tendency of a closed system to deteriorate without needed inputs and energy. Herbert Simon's bounded rationality describes decision limits caused by incomplete information and limited processing ability. Contingency theory rejects a universal best management method: effective arrangements depend on fit among structure, culture, environment, technology, and strategy. Stable environments may suit more formal rules; volatile ones may require greater adaptability. “It depends” requires explaining which conditions matter.

2.3.4 · Values and beliefs: control through meaning

Scripts are learned guidelines for interpreting and responding to situations. They make coordinated action possible but may also restrict imagination. Institutionalization occurs when rules or practices become valued for themselves and persist even when they no longer serve the organization well. Familiarity is not sufficient evidence of effectiveness. The textbook uses QWERTY as an illustration of persistence; the broader concept matters more than assuming every alternative keyboard is proven superior.

A self-fulfilling prophecy occurs when an expectation directs behavior that helps produce the expected result. Assuming all workers are selfish, then rewarding only narrow self-interest, can reinforce that pattern. Managers therefore influence the social reality others experience. Organizational culture and transformational leadership draw attention to shared values, symbols, and meaning that guide behavior. This is controlling through norms and identity as well as through explicit inspection.

2.3.5 · Sustainable development: TBL

Two late-1980s developments helped establish a call and a vision for change: Our Common Future from the World Commission on Environment and Development (WCED) articulated sustainable development; the Intergovernmental Panel on Climate Change (IPCC) strengthened scientific attention to human-caused climate change. Business networks and reporting frameworks supported sustainability strategies and disclosure. The chapter discusses the World Business Council for Sustainable Development (WBCSD) and the Global Reporting Initiative (GRI) for their roles in this transition; their significance here is collaboration and reporting rather than memorizing a simplified organizational founding chronology.

The natural resource-based view links environmental improvements with competitive/financial performance. Corporate social responsibility (CSR) concerns obligations toward societal well-being, including action without immediate financial benefits, although much research examines a business case. Shared value, associated with Michael Porter, proposes improving competitiveness through goods/services addressing social or environmental problems.

Stakeholder theory recognizes employees, customers, suppliers, neighborhoods, future generations, and other affected groups alongside shareholders. The textbook's 2019 Business Roundtable example illustrates a publicly stated broader corporate purpose. Stakeholder language alone does not demonstrate SET: classification also depends on whether financial enhancement or socio-ecological well-being has priority.

2.3.6 · SET: changing the priority of success

The chapter traces critiques of unlimited accumulation through Aristotle; Thomas Malthus on finite food-supporting capacity; Ernst Haeckel on social/environmental interdependence; Weber's iron cage critique of materialism and individualism; and Aldo Leopold's land ethic.

Three modern triggers connect to different dimensions: the 2008 financial crisis questioned financial market assumptions; the Anthropocene concept highlights human influence on planetary systems; and Occupy Wall Street (2011) drew attention to inequality and concentrated power. “Anthropocene” is used here as the chapter's conceptual term for human planetary impact, rather than a claim about its formal geological ratification.

The pandemic illustrated cooperation, basic needs, and environmental effects of changed activity; later rebounds showed that temporary reductions do not automatically create lasting sustainability. Research relevant to SET includes place-based organizing, sustainable entrepreneurship, Indigenous and spiritual traditions, compassion, and care. Examples include Taylor Guitars, Greyston, community-oriented organizations, and businesses in B Lab's certification movement. A certificate or organizational name should not substitute for examining actual purposes and practices.

SET challenges unlimited accumulation and the subordination of nature to economic activity. It seeks beneficial social/ecological outcomes with financial viability, rather than maximum financial wealth. History is not a guarantee that all firms will follow this path; the chapter frames it as an emerging approach that people can help shape.

Apply the chapter

For each case, identify the era/concept, the managerial assumption, and its consequences. Distinguish Taylor's task analysis from Follett's empowerment; Theory X/Y assumptions from worker classifications; open-system dependence from merely good internal procedures; and institutionalized routines from deliberate evaluation. Explain why all four functions remain relevant across the six eras. Connect historical organizational arrangements to alternative definitions of success.

Source and attribution

Adapted study reviewer based on Bruno Dyck, Arran Caza, Patrick Adriel H. Aure, James Leaman, Joel Marcus, Shieradel Jimenez, and Anne Kato, Management: Financial, Social, and Ecological Well-Being, 2nd edition (2026), Chapter 2, sections 2.0–2.3.6, Tables 2.1–2.2, and Figure 2.1. Assigned chapter. Source and this adaptation: CC BY-SA 4.0. Wording, organization, highlights, and study prompts have been adapted for FDNMANP_C17A. Practice questions are original study aids, not an instructor's quiz or a prediction of exam contents. Historical dates follow the textbook's teaching framework and are approximate where indicated.