Styles of Management

In the past two centuries managers of industry have taken, in general, two broadly different positions regarding management's social responsibilities. They are: «the 1aissez-faire» and the «paternal». The laissez-faire style of management is characterized by a devotion to the rigorous of the free market. Such managers feel no obligation to their employees outside the workplace, since the primary aim of a firm has been the maximization of profit. The paternal style of management, however, assumes that the firm has obligations to its workers outside the workplace and to the larger community.

The laissez-faire style of management represents a sort of combination of laissez-faire economic theory and the Protestant ethic. In this view the owner or manager has no responsibility for the welfare of the workers outside the immediate working situation and a person's situation in life is a reflection of his intrinsic merit in the eyes of God. The wages and other labour costs incurred by the firm are the result of competitive market conditions. In this view, then, the manager's responsibility to his employees begins and ends with operating the firm in such an efficient manner that it is able to meet competition in the market place.

If all business managers similarly followed a policy of intelligent self-interest, the broad social interests of society would be better served than by any other policy. Paternalism begins with the assumption that management has a social responsibility to the communities in which its plants has been located. It means social responsibility management should take. In the early part of the 19th century the industrialist and social reformer Robert Owen was the first manufacturer to back up words about management's social responsibilities with a program of action.

Owen was concerned with the social and economic conditions of workers and believed that the economic success of an enterprise did not have to depend upon exploitation of labour. In the mill town of New Lanark, Scot., Owen built workers' housing, schools, and a store that had been far superior to contemporary standards for workers' communities. The philosophy Robert Owen developed had been influential in the development of the cooperative movement in England.

When Henry Ford started the industrial world with his announcement of the $5-a-day wage in 1914, he followed it with steps designed to help workers make good use of their increasing affluence. The company already had a small legal department set up to help workers with the complicated problem of home buying, and then Ford established what he called a sociology department. It was staffed with social workers who made home visits to workers' families to provide advice and help on family problems.

The rise of unions in the mass production industries of the United States in the 1930s helped to persuade executives that a paternalistic approach to labour and community relations was no longer feasible one. Extensions of management's social responsibilities were now achieved through collective bargaining. Still, these broader benefits, such as pensions and health insurance, were limited to the workers and their immediate families. There was a tendency to assume that any responsibility for the welfare of the community as a whole should be assumed by government.