lOMoARcPSD|15781725
Introduction to Business
LECTURE 1 – business administration and organizational models
Business in context
• Time: evolution of business.
• Business environment: organizations and their strategies.
• Geography: international business.
• Business and society: institutions, ethics and sustainability.
Advent of business administration
• Firms become the focus.
• Increase in scale/complexity.
• Firm/organization as a system (interaction between elements).
History of business
• Firms reduce transaction costs (for example: iTunes).
• Input and output function: process the inputs in the most effective way -> specialization.
o See input and output model.
• USA: generalists (MBA model).
• The Netherlands: from specialists to generalists.
• Germany: specialists
Two elements of BA
• Disciplines feeding business administration: Engineering Studies, Math, Economics,
Sociology, Psychology, Law.
• Functional areas (processes): operations, marketing, HRM, accounting processes.
Core of Business Administration -> integration
• Organization: the way in which people are grouped and the way in which they operate to
carry the activities of the business.
• Strategy: a set of objectives and methods of achieving those objectives.
Main organization models
1. Scientific Management (Taylorism)
• Efficiency first (piece wage, standardization of tasks, time and motion studies, specialization
of tasks) + separation of thinking and doing (planning and procedures, implemented via a
management hierarchy, disciplining of workers) -> disseminate the bargaining power for
employees.
• Specialization in the company.
• Time and motion study by Taylor.
• Assumption: “man is a homo economicus”: a rationally calculating machine -> money =
main motivator, therefore: piece wage (motivation), hierarchy (discipline), scientifically
assessed
norms and procedures (motivation and discipline).
• Context of origin: 19th century: urbanisation -> more demand -> increase in scale, growing
complexity in doing business, lack of (direct) management control. Scientific Management is
a respond to this process.
• Scientific Management now: division of labour/standardization of tasks (from the 19th
century, but is still happening now), strict work instructions/output norms.
• Disadvantages of dividing labour: low motivation for employees (boredom), physical limits
to the activities you can perform.
, lOMoARcPSD|15781725
2. Human relations
• Hawthorne Experiments: labour conditions (=breaks) influence productivity. Breaks led to
a social network at work (social incentive).
o Workers’ attitude and morale can counteract the negative effects of fatigue, monotony
and boredom + informal relations, social groups, effective informal leadership,
concepts of participation, successful supervision and development of team spirit are
important.
• Hawthorne effect: attention motivates people (changes behaviour) -> discovery of the
informal group = homo sociologicus instead of homo economicus (not wealth
maximization,
but wellbeing maximization. Money is a secondary motivator).
• Context of origin: motivation problems on the shop floor, broader societal unrest due
to industrialization.
Scientific Management Human Relations
Efficiency Commitment
Homo economicus Homo sociologicus
Material incentives Attention
Hierarchy Informal relations
3. Contingency-Approach
• The dominant form of System Theory.
• Focusing on structure and procedures (instead of behavior).
• Broader perspective than Scientific Management.
• Core: “It depends” -> there has to be a “fit” between organizational characteristics and
the business environment, there is no “one best way” (Scientific Management).
• Example contingency: “it depends”.
o Simple, stable and abundant environment -> mechanistic structure.
o Complex, dynamic and scarce environment -> organic structure.
• Context of origin: WW II -> increase in scale, more diversification (more activities ->
firms became more complex), development of applied mathematics during WWII.
4. Organizations as Networks
• Firms/organizations are networks -> no hierarchy.
• Emphasis on knowledge transfer, flexibility, innovativeness, horizontal relations and not
on efficiency -> demands a different organizational structure.
• Trust (culture) keeps the network together, not procedures.
• Managers are facilitating rather than directing.
• Context of origin: more demand heterogeneity due to economic growth (luxury items ->
no “one size fits all” anymore), growing international competition, growing turbulence and
uncertainty.
o More responsive to the change of customers’ needs and behavior.
o More flexible to environmental changes.
Key learning: organizational models
• Alternation in focus on structure & procedures or on behavior & culture.
• The classic model with the emphasis on structure and procedures is alive and kicking
(Scientific Management).
• The contingency-approach is the dominant system theory.
LECTURE 2 – management and organization
The four management functions: planning, organizing, leading and controlling.
, lOMoARcPSD|15781725
• Management is not a step-by-step procedure, but a procedure with a feedback loop
that represents a flow.
• Planning: establishing organizational goals and deciding how to accomplish them.
• Organizing: grouping of resources and activities to accomplish end result in an efficient
and effective manner (HR and material resources).
• Leading and motivating: the process of influencing people to work toward a common goal.
• Controlling -> feedback (review and modify) -> procedure starts again.
o Not meant in the sense of supervising, but in the sense of monitoring.
o It’s the process of evaluating and regulating ongoing activities to ensure that goals
are achieves -> requires constant monitoring and adjusting.
o Control functions: set standards -> measuring actual performance -> take corrective action.
Management hierarchy
• Upper management: long term goals (products, markets, business organizing) -> jobs like
CEO, CFO, COO, CTO, VP – marketing.
• Middle management: interprets plans and sets actions -> jobs like regional/plant managers.
• Lower-level management: implements plans -> jobs like team leader, assistant
manager, foreman, shift manager.
Chain of Command: distribution of authority -> describes relationships.
• Line employees/management (continuous line): is in the direct chain of command and has
the direct responsibilities of those people who are linked to the organization goal. They
contribute
directly to the organization goal.
• Staff employees (dotted line): not directly contributing to the organization goal and advises
the line management.
• Internal auditors: examine issues related to company business practices and risks
• External auditors: examine the financial records and issue an opinion regarding the
financial statements of the company.
• Tension between staff and ?
• Tall versus Flat distinction (Ch. 15, page 449).
o Tall organization: more layers (managers).
o Flat organization: less management layers.
• Span of Control is related to Tall vs. Flat distinction -> describes the number of
management employees (number of subordinates a supervisor has).
• Fee burners: spend money.
• Fee earners: earn money.
Centralization or decentralization of decision-making authority
• (De)centralization: purely about centralization -> the right and the duty to take a decision.
Factors Organizational tendency
Business environment is complicated/unpredictable Decentralize
Risky decision Centralize
Lower-level managers don’t have strong decision- centralize
making skills
• “Flat” is not always “decentralized”. The level of (de)centralization depends on the degree
of delegation of authority, not by the number of layers.
Departmentalization: basis by which jobs are grouped together (how are tasks grouped together?).
• Bases:
o Function
o Product
Introduction to Business
LECTURE 1 – business administration and organizational models
Business in context
• Time: evolution of business.
• Business environment: organizations and their strategies.
• Geography: international business.
• Business and society: institutions, ethics and sustainability.
Advent of business administration
• Firms become the focus.
• Increase in scale/complexity.
• Firm/organization as a system (interaction between elements).
History of business
• Firms reduce transaction costs (for example: iTunes).
• Input and output function: process the inputs in the most effective way -> specialization.
o See input and output model.
• USA: generalists (MBA model).
• The Netherlands: from specialists to generalists.
• Germany: specialists
Two elements of BA
• Disciplines feeding business administration: Engineering Studies, Math, Economics,
Sociology, Psychology, Law.
• Functional areas (processes): operations, marketing, HRM, accounting processes.
Core of Business Administration -> integration
• Organization: the way in which people are grouped and the way in which they operate to
carry the activities of the business.
• Strategy: a set of objectives and methods of achieving those objectives.
Main organization models
1. Scientific Management (Taylorism)
• Efficiency first (piece wage, standardization of tasks, time and motion studies, specialization
of tasks) + separation of thinking and doing (planning and procedures, implemented via a
management hierarchy, disciplining of workers) -> disseminate the bargaining power for
employees.
• Specialization in the company.
• Time and motion study by Taylor.
• Assumption: “man is a homo economicus”: a rationally calculating machine -> money =
main motivator, therefore: piece wage (motivation), hierarchy (discipline), scientifically
assessed
norms and procedures (motivation and discipline).
• Context of origin: 19th century: urbanisation -> more demand -> increase in scale, growing
complexity in doing business, lack of (direct) management control. Scientific Management is
a respond to this process.
• Scientific Management now: division of labour/standardization of tasks (from the 19th
century, but is still happening now), strict work instructions/output norms.
• Disadvantages of dividing labour: low motivation for employees (boredom), physical limits
to the activities you can perform.
, lOMoARcPSD|15781725
2. Human relations
• Hawthorne Experiments: labour conditions (=breaks) influence productivity. Breaks led to
a social network at work (social incentive).
o Workers’ attitude and morale can counteract the negative effects of fatigue, monotony
and boredom + informal relations, social groups, effective informal leadership,
concepts of participation, successful supervision and development of team spirit are
important.
• Hawthorne effect: attention motivates people (changes behaviour) -> discovery of the
informal group = homo sociologicus instead of homo economicus (not wealth
maximization,
but wellbeing maximization. Money is a secondary motivator).
• Context of origin: motivation problems on the shop floor, broader societal unrest due
to industrialization.
Scientific Management Human Relations
Efficiency Commitment
Homo economicus Homo sociologicus
Material incentives Attention
Hierarchy Informal relations
3. Contingency-Approach
• The dominant form of System Theory.
• Focusing on structure and procedures (instead of behavior).
• Broader perspective than Scientific Management.
• Core: “It depends” -> there has to be a “fit” between organizational characteristics and
the business environment, there is no “one best way” (Scientific Management).
• Example contingency: “it depends”.
o Simple, stable and abundant environment -> mechanistic structure.
o Complex, dynamic and scarce environment -> organic structure.
• Context of origin: WW II -> increase in scale, more diversification (more activities ->
firms became more complex), development of applied mathematics during WWII.
4. Organizations as Networks
• Firms/organizations are networks -> no hierarchy.
• Emphasis on knowledge transfer, flexibility, innovativeness, horizontal relations and not
on efficiency -> demands a different organizational structure.
• Trust (culture) keeps the network together, not procedures.
• Managers are facilitating rather than directing.
• Context of origin: more demand heterogeneity due to economic growth (luxury items ->
no “one size fits all” anymore), growing international competition, growing turbulence and
uncertainty.
o More responsive to the change of customers’ needs and behavior.
o More flexible to environmental changes.
Key learning: organizational models
• Alternation in focus on structure & procedures or on behavior & culture.
• The classic model with the emphasis on structure and procedures is alive and kicking
(Scientific Management).
• The contingency-approach is the dominant system theory.
LECTURE 2 – management and organization
The four management functions: planning, organizing, leading and controlling.
, lOMoARcPSD|15781725
• Management is not a step-by-step procedure, but a procedure with a feedback loop
that represents a flow.
• Planning: establishing organizational goals and deciding how to accomplish them.
• Organizing: grouping of resources and activities to accomplish end result in an efficient
and effective manner (HR and material resources).
• Leading and motivating: the process of influencing people to work toward a common goal.
• Controlling -> feedback (review and modify) -> procedure starts again.
o Not meant in the sense of supervising, but in the sense of monitoring.
o It’s the process of evaluating and regulating ongoing activities to ensure that goals
are achieves -> requires constant monitoring and adjusting.
o Control functions: set standards -> measuring actual performance -> take corrective action.
Management hierarchy
• Upper management: long term goals (products, markets, business organizing) -> jobs like
CEO, CFO, COO, CTO, VP – marketing.
• Middle management: interprets plans and sets actions -> jobs like regional/plant managers.
• Lower-level management: implements plans -> jobs like team leader, assistant
manager, foreman, shift manager.
Chain of Command: distribution of authority -> describes relationships.
• Line employees/management (continuous line): is in the direct chain of command and has
the direct responsibilities of those people who are linked to the organization goal. They
contribute
directly to the organization goal.
• Staff employees (dotted line): not directly contributing to the organization goal and advises
the line management.
• Internal auditors: examine issues related to company business practices and risks
• External auditors: examine the financial records and issue an opinion regarding the
financial statements of the company.
• Tension between staff and ?
• Tall versus Flat distinction (Ch. 15, page 449).
o Tall organization: more layers (managers).
o Flat organization: less management layers.
• Span of Control is related to Tall vs. Flat distinction -> describes the number of
management employees (number of subordinates a supervisor has).
• Fee burners: spend money.
• Fee earners: earn money.
Centralization or decentralization of decision-making authority
• (De)centralization: purely about centralization -> the right and the duty to take a decision.
Factors Organizational tendency
Business environment is complicated/unpredictable Decentralize
Risky decision Centralize
Lower-level managers don’t have strong decision- centralize
making skills
• “Flat” is not always “decentralized”. The level of (de)centralization depends on the degree
of delegation of authority, not by the number of layers.
Departmentalization: basis by which jobs are grouped together (how are tasks grouped together?).
• Bases:
o Function
o Product
