The Classical School of Organization Theory

The classical theories in modern times had their foundations in sociological explanations of economic phenomena. These were attempts at describing how the organizing principles long applied by political and military rulers and the Roman Catholic Church were adapted to organizations with economic purpose.

The classical school of thought developed universal principles of organizational theory Opens in new window that can be applied to all situations.

The classical theory will be remembered as an era in which traditional ways of managing were challenged and scientifically systematized theory of organizations were distilled and propagated.

The chief contributors to the classical school of thought include:

  1. Adam Smith’s contribution to Organizational Theory.
  2. Taylor’s Scientific Management.
  3. Henri Fayol’s Principles of Organization.
  4. Max Weber’s Bureaucracy.
  5. Ralph Davi’s Rational-Planning Perspective.

1.    Adam Smith’s contribution to Organizational Theory

In 1776, the Scottish economist Adam Smith Opens in new window in his book, The Wealth of Nations Opens in new window noted that division of labor, relying on breaking the total task into small specialized atomistic units, helped in increasing efficiency by replacing the discretion of workers with controls exerted by machines or supervisors.

Adam Smith argued about the economic advantages from the division of labor in the pin-manufacturing industry. He noted that ten individuals, each doing a specialized task, could produce about forty-eight thousand pins a day among them. He proposed, however, that if each were working separately and independently, the ten workers would be lucky to make two hundred, or even ten pins combined in one day.

Adam Smith concluded then what most of us would now agree as common sense, that division of labor can bring about significant economic efficiencies.

Adam Smith described how efficiency could be improved by adopting the division of labor as the axiom for design. The division of labor, he believed is effective where there is the following:

It must be noted here that what Adam Smith emphasized about the division of labor remains a maxim in organization design Opens in new window today.

2.    Scientific Management: Taylor & Other Contributors

The notion of scientific management which is associated with F. W Taylor Opens in new window embodies the belief in workers as rational beings who seek to maximize their earnings, and a management whose task is to install procedures and techniques which produce maximum effort and efficiency.

The industrialists in the classical period were primarily concerned with overall managerial organization in order for their companies to survive and prosper. The managers applied the scientific method to their problems and they thought that effective management at all levels was the key to organizational success.

Taylorism is more a management philosophy than an organizational theory. However, it can be studied because it has elaborate techniques such as “time and motion study” and incentive payment systems which put in a rational ordered structure.

Fredrick W. Taylor

Fredrick W. Taylor (1856 – 1915) is the recognized father of scientific management.

Taylor started scientific management in his time-and-motion studies at the Midvale Steel Company Opens in new window in the early 1900s.

As an industrial engineer, he was concerned with inefficiencies in manual labor jobs and believed that by scientifically studying the specific motions that made up the total job, a more rational, objective and effective method of performing the job could be determined.

In his early years as a foreman in the steel industry, he saw different workers doing the same job in different ways. It was his opinion that each man could not be doing his job in the optimal way, and he set out to find the “one best way” to perform the job efficiently.

His argument proved to be correct and in some instances, Taylorism resulted in productivity increment of 400 percent. In almost all cases, his methods improved productivity over existing levels.

Taylor actually had shop and engineering experience and therefore was intimately involved with tools, products and various matchining and manufacturing operations. His well-known metal-cutting experiments demonstrated the scientific management approach.

Over a period of twenty-six years, Taylor tested every conceivable variation in speed, feed, depth of cut, and kind of cutting tool. The outcome of this experimentation was high-speed steel, considered one of the most significant contributions to the development of large-scale production.

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Coupled with Taylor’s logic and his rational, engineering-like approach to management was a simple theory of human behavior: people are primarily motivated by economic rewards and will take direction if offered the opportunity to better their economic positions. Put simply, Taylor’s theory stated that:

  1. Physical work could be scientifically studied to determine the optimal method of performing a job.
  2. Workers could thereafter be made more efficient by being given prescriptions for how they were to do their jobs.
  3. Workers would be willing to adhere to these prescriptions if paid on “differential piecework” basis.

In addition to advocating the use of scientific means to develop the best way to do a task, Taylor argued that several other principles were important.

  1. Workers with appropriate abilities had to be selected and trained in the appropriate task method.
  2. Supervisors needed to build cooperation among the workers to ensure that they followed the designated method of work. Building such cooperation included soliciting workers’ suggestions and being willing to discuss ideas for improved work methods.
  3. There needed to be a clear division of work responsibilities. Previously the workers planned how to approach a task, and then they executed it. Under the Taylor scheme, it was management’s job to do the task planning, using scientific methods.

Taylor’s four principles of scientific management are summarized here:

  1. Scientifically study each part of a task and develop the best method for performing the task.
  2. Carefully select workers and train them to perform the task by using the scientifically developed method.
  3. Cooperate fully with workers to ensure that they use the proper method.
  4. Divide work and responsibility so that management is responsible for planning work methods using scientific principles and workers; and workers are responsible for executing the work accordingly.

Fred Taylor took a lot of flack during his heyday. Unions were suspicious of him, employers were skeptical of his claims and the government thought he needed to be investigated. Taylor’s philosophy permeated his whole life.

Sudhin Kakar, in his study, Frederick Taylor: A Study in Personality and Innovation (Cambridge: MIT Press, 1970), notes that he did such strange things as experiment with his legs on cross-country walks to discover the step that would cover the greatest distance with the least expenditure of energy; as a young man, before going to a dance, he would conscientiously and systematically list the attractive and unattractive girls with the object of dividing his time equally between them; and he often incurred the wrath of his playmates when he was more concerned that the playing field for sports be scientifically measured than he was with actually playing the game.

Taylor’s “one best way” philosophy has often been misunderstood; though he believed that in terms of physical motions there should be “one best way”, he also recognized that the equipment needed to perform the “one best way” would vary from person to person. His famous example of equipping a large man and a small man with shovels of different sizes to match the equipment with the person.

While it is fashionable today to blast Taylor as being insensitive to human needs and treating people like machines, it is painfully obvious that his influence is probably as great now as it ever was. Though Taylor is criticized for treating people only as economic beings, surveys show that dollar motivation is still strong, particularly in manufacturing organizations. If one includes managerial personnel who are on some type of bonus or profit-sharing scheme, we probably have more people today on economic incentive systems than ever before.

Source: Jerry L Gray and Frederick A Starke, “Organizational Behavior – Concepts and Application”, Charles E Merrill Publishing Company Columbus, (Third Edition), Page 9.

Many have criticized Taylor’s work for dehumanizing the workplace and treating workers like machines, but his overall contribution to management was significant. Although others were studying similar methods at the same general time, Taylor was one of the first to take the theory and practice of management out of the realm of intuitive judgment and into the realm of scientific inquiry and reasoning.

Taylor’s ideas on time study, standardization of work practices, goal setting, money as a motivator, scientific selection of workers and rest pauses have all proved to be successful techniques of management today.

Taylor was by no means the only noteworthy scientific manager. Others in the movement, such as Frank and Lilian Gilberth and Henry L Gantt made especially significant contributions.

The Gilbreths

Other major advocates of scientific management were the husband and wife team of Frank Gilbreth (1868 – 1924) and Lillian Moller Gilberth (1878 – 1972). As Frank become involved in training young bricklayers, he noticed the inefficiencies that were handed down from experienced workers.

To remedy the situation, he proposed using motion studies to streamline the bricklaying process. Frank also designed special scaffolding for different types of jobs and devised precise directions for mortar consistency.

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On the basis of these and other ideas, Frank was able to reduce the motions involved in bricklaying from 181/2 to 4. Using his approach, workers increased the number of bricks laid per day from 1,000 to 2,700 with no increase in physical exertion.

Frank married Lillian Moller, who began working with him on projects while she completed her doctorate in psychology. The two continued their studies aimed at eliminating unnecessary motions and expanded their interests to exploring ways of reducing task fatigue.

Part of their work involved the isolation of 17 basic motions, each called a therblig (“Gilbreth” spelled backward, with the “t” and “h” reversed).

Therbligs included such motions as select, position, and hold – motions that were used to study tasks in a number of industries.

The Gilbreths used the therblig concept to study tasks in a number of industries. The Gilbreths used the therblig concept to study jobs and also pioneered the use of motion picture technology in studying jobs.

Lillian’s doctoral thesis was published as a book, The Psychology of Management, making it one of the early works applying the findings of psychology to the workplace. At the insistence of the publisher, the author was titled as L. M. Gilbreth Opens in new window to disguise the fact that the book was written by a woman.

Lillian helped define scientific management by arguing that scientific studies of management must focus on both analysis and synthesis.

She also had a particular interest in the human implications of scientific management, arguing that the purpose of scientific management is to help people reach their maximum potential by developing their skills and abilities. Lilian Gilbreth Opens in new window ranks as the first woman to gain prominence as a major contributor to the development of management as a science.

Henry L Gantt

Henry L Gantt (1861 – 1919) Opens in new window, one of Taylor’s closest associates, later became an independent consultant and made several contributions of his own. The most well-known is the Gantt chart Opens in new window, a graphic aid to planning, scheduling and control that is still in use today.

He also devised a unique pay incentive system that not only paid workers extra for reaching standard in the allotted time but also awarded bonuses to supervisors when workers reached standard.

He wanted to encourage supervisors to coach workers who were having difficulties.

The scientific managers like Taylor Opens in new window, Frank Opens in new window and Lilian Gilbreth Opens in new window and Henry Gantt Opens in new window were not the first or only group that recognized the importance of the operating functions.

A hundred years earlier, Adam Smith had carefully pointed out the advantages of division of labor and in 1832, Charles Babbage, a British mathematician with some astounding managerial insights, discussed transference of skill in his book, Economy of Machinery and Manufacture.

3.    Fayol’s Principles of Administrative Management

Henri Fayol Opens in new window was the most important exponent of administrative theory. The pyramidal form, scalar principle, unity of command, exception principle, span of control and departmentalization are some of the important concepts set forth by Fayol and his followers like Mooney Opens in new window and Reiley, Simon Opens in new window, Urwick Opens in new window, Gullick Opens in new window, etc.

Henri Fayol (France, 1841 – 1925)

Henri Fayol was born in 1941 at Constantinople in France. He graduated as a mining engineer in 1860 from the National School of Mining. After his graduation, he joined a French Coal Mining Company as an engineer.

After a couple of years, he was promoted as manager. He was appointed as General Manager of his company in 1888. At that time, the company suffered heavy losses and was nearly bankrupt. Henri Fayol succeeded in converting his company from near bankruptcy to a strong financial position and a record of profits and dividends over a long period.

Concept of Management

Henri Fayol is considered the father of modern theory of general and industrial management. He divided general and industrial management into six groups:

  1. Technical activities, which include production, manufacture, adaptation.
  2. Commercial activities, which include buying, selling and exchange.
  3. Financial activities, which involve search for and optimum use of capital.
  4. Security activities such as protection of property and persons.
  5. Accounting activities including stock-taking, balance sheet, cost, and statistics.
  6. Managerial activities such as planning, organization, command co-ordination and control.

These six functions had to be performed to operate successfully any kind of business. He, however, pointed out that the last function i.e., ability to manage, was the most important for upper levels of managers.

The process of management as an ongoing managerial cycle involving planning, organizing, directing, co-ordination, and controlling, is based on the analysis of general management by Fayol. Hence, it is said that Fayol established the pattern of management thought and practice. Even today, his management process is famously recognized.

Fayol’s Management Principles

The principles of management as orchestrated by Henri Fayol are given below:

  1. Division of work — Division of work or specialization alone can give maximum productivity and efficiency. Both technical and managerial activities can be performed in the best manner only through division of labor and specialization.
  2. Authority and Responsibility — The right to giver order is called authority. The obligation to accomplish tasks is called responsibility. Authority and responsibility are the two sides of the management coin. They exist together. They are complementary and mutually interdependent.
  3. Discipline — The objectives, rules and regulations, the policies and procedures must be honored by each member of an organization. There must be clear and fair agreement on the rules and objectives, on the policies and procedures.

    There must be penalties (punishment) for non-obedience or discipline. No organization can work smoothly without discipline, preferably voluntary discipline.
  4. Unity of Command — In order to avoid any possible confusion and conflict, each member of an organization must receive orders and instructions only from one superior (boss).
  5. Unity of Direction — All members of an organization must work together to accomplish common objectives.
  6. Emphasis on Subordination of Personal Interest to General or Common Interest — This is also called principle of co-operation. Each shall work for all and all for each. General or common interest must be supreme in any joint enterprise.
  7. Remuneration — Fair pay with non-financial rewards can act as the best incentive or motivator for good performance. Exploitation of employees in any manner must be eliminated. Sound scheme of remuneration includes adequate financial and non-financial incentives.
  8. Centralization — There must be a good balance between centralization and decentralization of authority and power. Extreme centralization and decentralization must be avoided.
  9. Scalar Chain — The unity of command brings about a chain or hierarchy of command linking all members of the organization from the top to the bottom. Scalar denotes steps.
  10. Order — Fayol suggested that there is a place for everything. Order or system alone can create a sound organization and efficient management.
  11. Equity — An organization consists of a group of people involved in joint effort. Hence, equity (i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint collaboration.
  12. Stability of Tenure — A person needs time to adjust himself with the new work and demonstrate efficiency in due course. Hence, employees and managers must have job security. Security of income and employment is a prerequisite of sound organization and management.
  13. Spirit of CooperationEsprit de corps is the foundation of a sound organization. Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible for good performance.
  14. Initiative — Creative thinking and capacity to take initiative can give us sound managerial planning and execution of predetermined plans.

4.     Max Weber’s Bureaucratic Model

Max Weber Opens in new window, a German sociologist developed the bureaucratic model. His model of bureaucracy includes:

  1. Hierarchy of authority.
  2. Division of labor based upon functional specialization.
  3. A system of rules.
  4. Impersonality of interpersonal relationships.
  5. A system of work procedures.
  6. Placement of employees based upon technical competence.
  7. Legal authority and power.

Bureaucracy Opens in new window provides a rigid model of an organization. It does not account for important human elements. The features of bureaucracy are:

Bureaucratic model is preferred where change is not anticipated or where rate of change can be predicted. It is followed in government departments and in large business organizations.

An Appraisal of the Classical School of Thought

The modern era of management theory began early in this century with the classical management perspective which included both scientific management and administrative principles approaches.

Scientific management, pioneered by Frederick Taylor, claimed decisions about organization and job design should be based on precise, scientific procedures after careful study of individual situations.

Administrative principles focused more on the total organization and grew from the insights of practitioners. For example, Henri Fayol proposed fourteen principles of management, such as “Each subordinate receives orders from only one superior” (unity of command) and “Similar activities in an organization should be grouped together under one manager” (unity of direction).

Scientific management and administrative principles were closed systems approaches that did not anticipate the chaos facing companies in the modern era.

Scientific management, administrative principles, and bureaucratic approaches to organizing seemed to work well up to the 1960s.

Looking at the success of the classical theories, we can say that the success during this period occurred because the economies of Europe and Japan had been shattered by World War II Opens in new window, so the United States had entire playing field to itself. Organizations were overmanaged; the administrative and professional staff ratios were bloated.

The 1970s and 1980s brought about real international competition from Europe and Japan. The 1980s, therefore, produced new corporate cultures that valued, that lean staff, flexibility, rapid response to the customer, motivated employees, and quality products.

The work of sociologists on bureaucracy, beginning with Weber, appeared in the 1950s and 1960s and helped establish the notions of bureaucracy which is characterized as rational, problem-solving, decision-making systems.

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