Fredman Claim Concerning the Business Sole Aim - Coursework Example

1. MANAGEMENT THEORY According to the Business Dictionary, management theory is defined as a collection of ideas which outlines general rules on how to manage a business organization. Thomas More (1478-1535) states that management consists of the interlocking functions of creating corporate policy and organizing, planning, controlling and directing an organization’s resources in order to achieve objectives of that policy, the main aim being to maximize shareholders’ wealth through maximization of profit. Many theories have been advanced by scholars from various fields to expound on the management theory. These theories come up with various ways of managing organizations and some may conflict each other. A critical review of them is important so as to get a grasp of the various perspectives of management theory. Fredrick Taylor (1856-1915) proposed that managers should do their work scientifically so as to determine one most appropriate way of doing it. He advocated for selection of workers based on their physical ability, training and development to improve performance and productivity, payment based on piece rate system and functional foremanship where managers are supposed to plan, coordinate and direct the work while subordinates implement by doing the work activities. He put more emphasis that all these should be done scientifically so as to achieve the best results. Taylor’s work contributed much to the management theory since it formed the basis for division of labour which by far increases productivity. Training and development of workers is relevant up to date. Many organizations train their employees in order to enhance their skills to handle complex tasks that might come their way. The piece rate system whereby payment is based on the output of the worker and not on the time spent acts as an incentive for workers to flex their muscles to earn an extra penny thus leading to high productivity. However, Taylor failed to understand that workers are not only motivated by monetary rewards. There are many other factors that motivate workers for example the relationship between the supervisor and the subordinate, which he fell short of to explain. Besides, He treats human beings like machines whose value is measured by the level of output they produce thus failing the test of humanity. Again, there cannot be one best way of doing something. The work environment constantly changes and so requiring innovation or creativity on part of the managers. Therefore, this theory is demonized by the human relations theorists. Alfred Marshall (2007) also vehemently criticizes Taylor’s work. Though, Taylor was criticized for his work, he was right on track according to the aims of business which is to make profit for the organization. The piece rate system ensured that that there was high productivity which is then sold to customers to bring in revenue. The one best way he advocated meant it minimized costs of production and so because profit is revenues less costs the profit is maximized thereby meeting the chief goal of business. Henry Fayol (1841-1925) came up with the fourteen administrative principles of management. They include division of labour a copy of Taylor’s functional foremanship, authority which involves granting formal positions in the organization; discipline which is the obeying rules of underlying the organization; unity of command where each worker should have a supervisor; unity of direction that is grouping of similar tasks under one department or manager; subordination of personal interests in order to follow the general interests of the organization; remuneration where rewards and miscellaneous benefits are applied fairly to the employees; centralization that demands that the organization’s power and authority may be centralized or decentralized depending on the size and qualifications of managers; chain of command where authority should flow from top to bottom; order whose claim is that human and material resources should be coordinated; equity which calls for fairness; stability of tenure to reduce employee turnover rate; initiative whereby employees are encouraged to be creative, and spirit of cooperation where managers are expected to encourage teamwork among the members of the organization. Fayol’s theory concerned itself with the management of the whole organization. So, it is more comprehensive than Taylor’s .It is applicable in many organizations today. This theory came up with principles that are mostly applicable even in this 21st century which is faced with uncertainty for in this age of information only one thing is constant: change. Nonetheless, these principles cannot be applied all at once in an organization and even if they are all applied it will not be with equal importance. A critical examination of Henry Fayol’s theory brings to light that the main aim of the business organization is to ensure that it earns enough revenue to sustain its going concern. This is clearly highlighted in the principle that the different parties in the organization must subordinate their interests to the general interests of the organization. This in essence means all should work towards realizing the organization’s goals, one among them being making a positive return on investment. The consideration of fair remuneration is just an incentive to the employees so that they work extra hard to continue making the organization achieve its aims. Fayol did not advocate corporate social responsibility since this could just be a drain on the organization’s resources thus reducing the organization’s profit. Ludwing Bertalanfty (1960) developed the systems theory, the so-called systems approach to management. He saw the organization as organic and open system, comprising subsystems that constantly interact. He stated that a system, which in this case, is the organization, is made up of subsystems which are interdependent and interact amongst themselves. The subsystems should be analyzed in their interrelationships and not in isolation. The organization as a system has also some territories that distinguish it from external environment and it interact with the external environment too. The systems approach further explains the idea that the business of the business is business as per Fred. This means that the business should try all it can to combat all the forces in the environment in order to make profit as it hopes that its going concern is guaranteed. Failure of the organization to embrace co-ordination of the subsystems and good relationship with the parties forming the environment might threaten the profitability and the going concern of the business. From the look of things, management theory was developed in order for the business organization’s managers to plan and co-ordinate the resources of the organizations so as to make profit for the investors who are In this case are the shareholders thereby guaranteeing the going concern of the business. 2. Fredman argues that the main responsibility of business is to make profits for the shareholders. The shareholders then are the ones to decide whether to give part of their profits to address issues in the society. According to Corporate Watch, corporate social responsibility in essence has ulterior motives. In a clear statement that goes: like the iceberg, most CSR activity is invisible…It is often an active attempt to increase corporate domination rather than simply a defensive management operation. This means that corporations will take some of their shareholders wealth to give to charity if they spot an opportunity will bring profit to them. A good example is the free samples given in many companies. To many, corporate social responsibility is a public relations stratagem. It helps to conceal their negative impacts, for example, environmental pollution, thus salvaging their image. This serves well since a company with a dented image is a business dwarf. Corporate social responsibility is seen as an opportunity for business companies to avoid regulation. Most businesses try to disapprove any regulation that disadvantages them with regard to social responsibility. They argue that regulation by the government can undermine voluntarism from the businesses. Therefore, many companies are for the argument that they should be given leeway to choose which corporate social responsibility activities they can easily engage in. This is insanity on part of the companies because if they were really for the social responsibility they would not resist some regulations that threaten their profitability. Joel Bakan brings this clear by stating thus: “No one would seriously suggest that individuals should regulate themselves that laws are against murder, assault and theft are unnecessary because people are socially responsible. The proponents of the corporate social responsibility who claim that it is for the good of the society are accurately proven wrong by this statement and otherwise proving right Fredman that organizations are on a mission to serve their self interests, that is maximization of shareholders’ wealth and ensuring their going concern. Fredman’s claim is valid because the market knows no morality. Adam Smith, a classical economist, argued for that invisible hand of market forces ensures there is equilibrium in the market and no one takes advantage of another. The New Economics Foundation oppose Adam Smith with the following words: “In everything from massive corporate scandals to anti-trust cases to serious environmental degradation we see all around us, it is obvious that Adam Smith’s invisible hand cannot be relied upon to be bring us successful or sustainable outcomes.” This means that without regulations the business corporations might cause greater harm than good while dangling the carrot of corporate social responsibility, ostensibly, morality. Corporate social responsibility activities are merely public private partnerships. The activities involve consolidating resources between the government and private business companies such as setting up community upgrading projects. These activities make it hard for people to distinguish the role of government from that of the businesses. The roles thereof should, if not a must, be clearly defined so as to hold both parties accountable. An official of the World Bank Group by the name Nigel Twose elaborates his dissatisfaction in no uncertain terms when he says, “with the private sector increasingly centre stage, questions are being raised around prior assumptions that global public goods can only be tackled (ethically and practically) by the public sector.” Fredman asserts that the business of business is business. This is not the case in many businesses since they collaborate with the government in order to gain power and control major decisions of countries. A social commentator Leslie Sklair observed, “Global capitalism has to be politically active to maintain its projects.” The concept that the developing countries are emerging economies is a clear cut indication that the world itself is not for corporate social responsibility. Countries such as Brazil, Turkey and China who are up on their toes towards development are termed as emerging economies. These countries are viewed from pure capitalist lens. The multinational companies are viewed as siphons which repatriate profits from the so called developing economies to the developed states. In conclusion, Fredman claim that the business’ sole aim is to make profit was met with criticism but it is very valid given the arguments given. References Pigou, A.C. (1920). The Economics of Welfare. London. Macmillan. (1966) Scientific management and welfare labour. The Journal of Political Economy, 24(9): 833-54 Nelson, R.H. (1998) Rethinking Scientific Management. Discussion paper 99-07. Washington DC: Resources for the Future. ‘Taylorism’ The Engineer 111 (19 May 1911: 520-1). The European Journal of the History of Economic Thought ISSN 0967-2567 print/ISSN 1469-5936 online @ 2007 Taylor and Francis. http://www.tandf.co.uk/journals DOI:10.1080/09672560601168405 (2003) a list of essays collected in bound volumes by Alfred Marshall:part2. In Marshall Studies Bulletin, vol VIII. Available online at: http://www.cce.unifi.it/dse/marshall/welcome.htm. Clack, J.M. (1918). Economics and modern psychology: 11 Journal of Political Economy, 26(2): 136-66 David Bach, David Bruce Allen: Why Every CEO Needs to Know About Nonmarket Strategy (Spring, 2010) Bhattacharya C.B, Sankar Sen, Kornchun: Using Corporate Social Responsibility to Win the War for Talents (Winter, 2008) Read More