Application of Management Theories on Volkswagen - Literature review Example

TABLE OF CONTENTS 1.0 Introduction 2 2.0 Volkswagen overview 3 3.0 Review to theory 3 3.1 Classical approach to management theory 3 3.2 Human relations approach to management theory 5 4.0 Application of management theories on Volkswagen 6 5.0 Conclusion 8 6.0 References 9 1.0 INTRODUCTION Management is a continuous practice which involves synchronization of various differing activities like planning, controlling, coordinating and motivating towards a common desired goal. Stoner, Freeman and Danial (2003) explains that different organizations adopt to differing management theories and approaches which best suits their environmental conditions and functions accordingly. In light of the same Stoner, Freeman and Danial (2003) defines management as a process which aims to clearly highlight the organizational goals and objectives, defines the work system, the organizational structure suited for carrying out the work, and a complete process through which organization maintains an environment for ensuring efficient and effective working of all its employees aimed towards achievement of both individual goals and objectives along with group and organizational goals and objectives in a coordinated and synchronized manner. Hannagan (2005) further lays importance on the theories and school of thoughts which has emerged as a process of application of management. Hannagan (2005) opines that management theory has broadly led to the development and evolution of two approaches of management which are commonly named as the Traditional or Classical approach and the Human Management Theories. According to Coles (2004), both Classical and Human Management Theories offers two different approaches to the management theory. While one look and highlight emphasis on the employees as an exclusive means to achieve organizational goals and objectives the other focuses on growth of an organization with emphasis on motivation and behavioral development among the employees and workers. With this discussion in mind this report focus and highlights on a complete discussion on the two different management theories and critically examine and evaluate of how such theories are applied on Volkswagen group in today’s environmental conditions and situations. 2.0 VOLKSWAGEN OVERVIEW Volkswagen came into operation in 1937 with a basic aim to develop and bring a revolutionary change in the automobile industry by its so called “People’s Car”. Volkswagen is German based automobile company which is involved in development of vehicles branded passengers and commercial vehicles as well their parts and components. Reuters (2012) explains that Volkswagen has its organizational structure mainly divided into two major divisions which are the automotive division and the financial services division. The Automotive Division concentrates on manufacturing and designing of motor vehicles, engines and its other useful components and parts whereas the Financial Service Division involves itself into various service provider activities which involve providing services to customer and dealer in fields of financing, insurance, leasing, business fleets etc. the company today develops brands with an international market and value which includes Volkswagen, Audi, Lamborghini, Skoda etc among others whereas in commercial section the group is excelled with producing Scania buses and trucks. 3.0 REVIEWS TO THEORY 3.1 CLASSICAL APPROACH TO MANAGEMENT THEORY The classical approach to management theory emphasizes on the structure of an organization with a small interest on appropriate resources for the organization and the roles undertaken by a leader or manager in managing the organization. As per Coles (2004) classical management theory is mainly concentrated on creating multiple levels of workers to improve and enhance productivity. Coles (2004) further lays emphasis on how different management levels play a vital role in the productivity and growth of an organization as the lower level cadre employees are always under a strict guidance under the vigil of supervisors who in turn are overseen by managers. Hannagan (2005) is of the view that classical approach to management theory emphasis on any level of organizational employees should be clearly laid about their duties and responsibilities in the organizational structure in order to enhance productivity and is further based on impersonal aspect of business relationship. He strictly argues that management and employees should take special care to ensure personal relationships and friendships do not in any means become a hindrance to attainment of organizational goals. In contrast to the same Almashaqba, & Nemer Al-Qeed, (2010) argues that employees only posses basic economic and physical needs and social and job-fulfillment needs does not exists or is of very low importance. They further posited that classical theory to management is more focus to achieve specialization in working with a centralized decision making process which is to a large extent focused on profit maximization. It is concerned with promoting efficiency in employees and organization at large through the use of this management practices. Adetule. (2011) posits that scientific management approach is more clearly defined by Frederick Taylor which emphasis on manager as the key element who is first and majorly responsible for growth of an organization’s output and productivity. He states that Taylor has well defined four basic principles which define scientific management in all dimensions which are Scientific management is to be applied in an organizational context. Managers play a vital role and should continuously involve in picking, instructing and developing employees. Managers should on a continuous basis ensure cooperation with its employees and further ensure application of scientific management in all circumstances. Managers should get involved with employees as a part of their duty to ensure duties of employees are achieved on a timely and correct manner. Whereas it is to be noted that Taylor (1996) states that scientific management is a complete system which keeps a vigil on the employees, develops appropriate working methods and procedures and ensure incentives to employees using piece rate system. He is of the view that the best practice to ensure higher performance and productivity is to create financial incentives by making payment as per piece rate system. He is more of the view that component task in manual manufacturing should be divided on basis of time and motion studies thus his management theory mainly leads towards rigidity in specialization processes. He further does not consider on practical grounds about the reality that economic interests of management and employees do not always match as defined by his scientific management theory. Another famous approach in classical theory to management is the Bureaucratic approach as defined by Max Weber which focuses on specialization through job roles and not through persons. He lays emphasis on creation of a hierarchy of authority to clearly distinguish between the administrators or managers and employees, laying down complete system of rules for ensuring efficient and impersonal operations and highlighting that impersonality does not in any means ensure arbitrary powers but advancement of authority in an organizational structure. Celik (2011) however further observes that bureaucratic approach has its own shortfalls that is, it depicts a picture of organization being more rigid and atrocious which is in practicality not the case, division of labour and specialization process can lead to creation of hostility and larger rifts among employees and lastly promoting impersonality can actually lead to bunch of frustrated employees promoting more of resistance on previously authorized decisions. The third famous classical approach to management theory was proposed by Henry Fayol. Henry Fayol successfully introduced six basic functions and 14 governing principles which act as a managerial guide for managers while executing their duties in an organizational framework. The six functions include forecasting events, monitoring, planning, coordinating, organizing and lastly commanding. His fourteen principles focuses on division of work where specialization in work process is considered as one the most efficient and optimum manner to utilize human resources, authority is a key element to ensure correct issuance of orders and compliance of the same, discipline is necessary for the success and continuous smooth running of the business, unity of command where entire organization seeks to strive towards the accomplishment of a shared organizational goals and objectives, synchronization and subordination of personal interest with those of the organization, remuneration where salary is not just focused on increasing productivity but considers other factors such as inflation, business success etc, a complete centralized system where authority is clear, hierarchies of management for correct flow of authority, responsibility and accountability, stability of tenure of personnel, spirit de corps to aim harmony and peace among employees among others. Thus we see a lot many renowned personnel majorly contributing and making an impact on the classical approach to management theory. Now let us consider on the human relation approach to management to clearly understand the real meaning of the same. 3.2 HUMAN RELATIONS APPROACH TO MANAGEMENT THEORY The human relation theory was formulated to deal with human factors unlike classical theory which focused on structure of an organization and its related factors. This theory concentrates on motivational factors among groups and individuals and lays its emphasis on leadership. Elton Mayo described the theory as human behavior of individuals in an organization stating that it is their needs which acts a key factor in determining the effectiveness and efficiency of production in an organizational perspective framework. The human relations theory had its beginning in the Hawthorne Studies conducted in 1920’s. This theory pays attention on the plight of employees than focusing on rules, procedures and different processes in an organization. It concentrates on liaison of communication in the work process so as to ensure joint effort success in the running of an organization. It agrees that productivity of workers remain constant or even increase despite the physical environment in which they worked. Thus ensuring that employees respond greatly when they are centered as the main attraction in the work place than the physical environment in which the work is carried on. Palmer and Hardy (2000) states that human relation theory instead of just simply viewing employees as cogs in the company wheel, should focus on emphasizing employees in assisting their regular work process so as to ensure better productivity and higher optimum utilization of the available resources. As per Canina, Palacios and Devece (2012) there are various management actions which can ultimately result in higher employee motivation when human relations theory is correctly applied. Taking care of employees by providing them with an atmosphere which comforts a homely environment, clearly spelling the objectives of organization and ensuring fulfillment of organizational objectives will ultimately lead to betterment of employees and their standard of living, relying upon employees in participation of decision makings, employees training and development, rewards and recognition for employees higher and significant performance in daily routine jobs etc. Human relations theory in fact increases organizational productivity and lowers employee turnover rate to a considerable extent as the employees feel and develop a positive attitude towards organization and its management system as the same is aimed towards a new concept of informal organization structure. Palmer and Hardy (2000) further argues that human relations management theory holds the believe that employees should not be awarded with quotas and directions but instead management should constantly seek to ensure that employees are exposed to motivational and emotional tactics to ensure higher productivity with optimum utilization of the available resources. It is to be further noted that Elton Mayo in his experiments explained to a great extent that why the behavior of employees at work should be taken with a serious inclination. It was the results and direction provided by his successful experiments that many other theories were developed like Maslow’s need hierarchy theory which provides a complete framework of motivational factors and emerged as a strong theory practiced in modern times. Thus we see that both classical and human relations approach to management theory has great implications in the modern world business scenario. Discussed underneath is a practical approach of how the same are applied in context to Volkswagen group. 4.0 APPLICATION OF MANAGEMENT THEORIES ON VOLKSWAGEN Volkswagen group is managed by a board of management who is tasked to completely manage the group activities. In addition to the same the company features a Supervisory board who are responsible for appointing, advising and monitoring the entire board of management and participates equally in making managerial decisions. This is in line with the classical approach to management in particular the scientific management approach as the same was posited by Buren (2008) that managers attitude behavior and working pattern is the first and foremost factors accountable for the growth of an organization’s output. The Volkswagen group implements a practice known as knowledge management where learning experiences are created all over the world. Relevant knowledge is applied at the right place and knowledge from employees leaving the company is retained back in the company for future growth and development of the company. Henry Fayol in his theory explained that division of work leads of specialization and promotion of employee initiatives is important at all level of the company. Volkswagen group seems to be in line with the same as the company ensures that all innovative solutions are divided throughout the region and existing branches of the company all across the world. It is to be further noted that Henry Fayol also emphasized on promotion of coordination, cooperation and synchronization of work among all employees in an organizational framework, this approach is also equally applied by Volkswagen Group through the promotion of networking activities in its process of family job creation (News Headliner, 2012). These elements are distinctly and clearly visible as the company operates on a processed manner of having ideal knowledge and applying the same at the right place and time. An important catalyst and feature for success of Volkswagen is to ensure that employees operate in a manner which creates synergy in work process with ideal knowledge and capabilities to ensure higher value creation activities and leading to more sharper and efficient activities. This approach adopted by management of the Volkswagen Group is clearly depicted in the Classical approach to management theory which focuses that core element of employees is to ensure high productivity with optimum utilization of available resources and should be equally backed with the ability to create new innovations and initiatives for the company. Organizational structure is a key element which helps in developing a formal communication channel and promotes a hierarchical order to conduct operations and activities in a formal manner with equal hierarchical authority (Brooks, 2011). This clearly demonstrates that organizational structure helps in creation and allocation of work among different levels of managerial pyramid with the senior managers responsible for strategic decision making whereas the low level employees are actually concerned with responsibility of manufacturing and assembling of company products (Volkswagen AG, 2008). This further throws light on the fact that there is little conversation between the senior officials and the shop floor employees. This type of management is what was brought into context by the classical approach to management theory which emphasized on different levels of managerial status with formal channel of reporting system. Volkswagen mission, vision and aims also throw light on the cooperation strategy that the company holds for their employees. The group offers attractive employment opportunities and promises good working environment along with a long lasting fact that they remunerate employees as per their performance and work done i.e. on the basis of level of productivity which they successfully generate in the company. Volkswagen is also seen utilizing the human relation approach to management especially in its designing and market development department. The company also ensures complete training of employees and offering them ample development opportunities clearly highlighting implementation of human relation model to ensure that employees even in the lowest level fells to be a part of the group or the company (Hegar 2011). Further with regard to human relations theory, the group follows a recent rule passed by the council where operations of the company are restricted to the current employees only. Employees on a regular basis complained about the high level of stress as they are answerable to mails even when they are relaxing at home due to mail configured in their smart phones. Owing to same, the company recently offered relaxation to its employees by giving them surety that accountability shall be curtailed to limited extent when the mails are not sent during the office working hours. As such it can be concluded that Volkswagen group applies both classical and human relation approach in its management system. However the group is more inclined towards scientific approach with a fusion of both formal and informal organizational structure. The group also extensively uses human relation theory in its designing and development of vehicles. 5.0 CONCLUSION Management plays an important role in the success or failure of any organization. Management ensures that there is a correct, prudent and efficient management of available resources so as to gain advantage of optimum utilization of all available resources. There are a large school of thoughts on which management relies. Starting with the classical approach to management theory it mainly focuses on employees at all levels are required to carry on their duties and responsibilities in accordance with clearly laid out procedures and processes which is aimed towards increased productivity. The classical approach on a higher discussed can be broadly classified into three different forms namely scientific, bureaucratic and administrative management approaches. All this approaches are developed in context to organizational framework and varies as per management procedures and processes in applying the same. Human relations approach to management on the other hand aims at employee independence and involvement of their participation in decision making process of the organization so as to motivate employees and make them feel themselves as a part of the company or group. Looking on both the approaches of management theory in contrast to Volkswagen group, it can be clearly viewed that the group applies a hybrid model where it uses features of both classical and human relations theory of management. The company has a board of management and supervisory team who is mainly responsible for strategic decision making and is equally characterized by participation from its employees in creation of new innovative designs before any final conclusion is drawn. The company combines a mixture of both the approaches to management and has to further realize that despite of just targeting and meeting its operational costs and attaining maximum profits it can under no circumstances ignore employee needs and wants and develop strategies accordingly to satisfy the same (Crowthe & Green2004). 6.0 REFERENCES Almashaqba, Z, & Nemer Al-Qeed, M (2010). The Classical Theory of Organization and its Relevance. International Research Journal Of Finance & Economics, 41, pp. 60-67 Adetule, P. (2011). The handbook on management theories. New Jersey, Author house Buren, H. (2008). Fairness and the main management theories of the twentieth century: a historical review, 1900-1965. Journal of Business Ethics, 82(3), pp.663-644. Brooks, G. (2011). Group dynamics. Automotive Manufacturing Solutions, 12(4), 20-25. Cole, G (2004). Management Theories and Practices (6th e.d.) London: Thomston Publication Celik, M. (2011). A theoretical approach to the science of management. International Journal of Humanities and Social Science, 1(3), pp.65-69. Canina, L., Palacios, D., & Devece, C. (2012). Management theories linking individual and organizational level analysis in entrepreneurship research. International Entrepreneurship and Management Journal, 8(3), pp.271-284. Crowthe, D. & Green , M. (2004).Organisational theory, California, CIPD publishing Hannagan, T (2005). Management Concepts and Practice (4th e.d.). England: FT Prentice Hall. Palmer, I., & Hardy, C. (2000). Thinking about management. London: Sage. Fernando, M. Pedro, R., & Gonzalo, S. (2012). Transforming human resource management systems to cope with diversity. Journal of Business Ethics, 107(4), pp. 511-531. Hegar, K. (2011). Modern Human Relations at work, New York, Cengage learning. 'News Headlines' 2012, Marketwatch: Automotive, 12, 6, pp. 4-6, Business Source Complete, EBSCOhost, Reuters, (2012). Volkswagen AG (VOWG.DE). Available at http://in.reuters.com/finance/stocks/companyProfile?symbol=VOWG.DE Stoner, J. A. F., Freeman, R. E., & Danial, R (2003). Management (6th e.d.). New Delhi: Prentice Hall of India Taylor, F. W. (1996). The Principles of Scientific Management. In J.M. Shafritz & J.S. Ott (Eds.), Classics of organization theory (pp.66-79). Belmont, CA: Wadsworth Publishing Company. Volkswagen: In a League of Its Own' 2009, White Book - European Autos Data Book - 2Q:09:Size Really Does Matter - Why The Shift To Small Cars Is A Big Problem, pp. 77-80, Read More