The Classical Management Theory is thought to have originated around the year 1900 and dominated management thinking into the 1920s, focusing on the efficiency of the work process. It has three schools of thinking: Scientific management, which looks at ‘the best way’ to do a job; Bureaucratic management, which focuses on rules and procedures, hierarchy and clear division of labour; and Administrative management, which emphasises the flow of information within the organisation.
Frederick Winslow Taylor (1856-1915) is known as the father of scientific management. His approach emphasised empirical research to increase organisational productivity by increasing the efficiency of the production process. In the United States especially, skilled labour was in short supply at the beginning of the twentieth century. The only way to expand productivity was to raise the efficiency of workers. Scientific management theory states that jobs should be designed so that each worker has a well-specified, well-controlled task and specific procedures and methods for each job must be strictly followed.
Taylor’s management theory rests on a fundamental belief that managers are not only superior intellectually to the average employee, but that they have a positive duty to supervise staff and organise their work activities. Thus, it was only applied to low-level routine and repetitive tasks that could be managed at supervisory level.
Taylor developed four principles of scientific management:
1. A ‘best’ methodology should be developed scientifically for each task.
2. Managers should select the best person to perform the task and ensure that the best training is given.
3. Managers are responsible for ensuring that the best person for the job does the job using the best methodology.
4. Remove all responsibility for the work method from the worker and give it to management. The worker is responsible only for the actual job performance.
Taylor based his management system on production-line time studies. Using time study as his base, he broke down each job into its components and designed the quickest and best methods of performing each component. He also encouraged employers to pay more productive workers at a higher rate. Scientific management became very popular in the early part of this century as its application was shown to lead to improvements in efficiency and productivity.
Advantages of Scientific Management
â- Introduced a scientific approach to management.
â- Improved factory efficiency and productivity.
â- Used as a model upon which the creation of modern assembly lines was based on.
â- Allowed managers to reward workers for higher performance and productivity through the differential rate system.
â- Built a sense of co-operation between management and workers.
Disadvantages of Scientific Management
âž¢ Limited by its underlying assumption that workers were primarily motivated by economic and physical needs. It therefore overlooked the desire of workers for job satisfaction.
âž¢ Led, in some cases, to the exploitation of workers and it has been often suggested that scientific management was at the centre of many strikes prevalent in those days.
âž¢ Excluded the tasks of management in its application.
âž¢ Instilled an authoritarian leadership approach.
âž¢ Focused only on the internal operations of the organisation.
Max Weber (1864-1920), known as the father of Modern Sociology, was the first person to use the term ‘bureaucracy’ to describe a particular, and in his view superior, organisational form. He considered the ideal organisation to be a bureaucracy whose activities and objectives were rationally thought, whose divisions of labour were explicitly spelled out. He believed that technical competence should be emphasized and that performance evaluations should be made entirely on the basis of merit. Weber defined the key elements of a bureaucracy as:
I. 1. A well defined hierarchy with a clear chain of command where higher positions have the authority to control the lower positions.
II. 2. Division of labour and specialisation of skills, where each employee will have the necessary expertise and authority to complete a particular task.
III. 3. Complete and accurate rules and regulations, in writing, to govern all activities, decisions and situations.
IV. 4. Impersonal relationships between managers and employees, with clear statements of the rights and duties of personnel.
V. 5. Technical competence is the basis for all decisions regarding recruitment, selection and promotion.
Weber’s model of bureaucratic management advanced the formation of huge corporations such as ford.
Bureaucratic Management – Contributions
â€¢ Ensured that the organisation would be operated and managed by qualified/high calibre personnel only.
â€¢ Allowed many organisations to efficiently perform routine organisational tasks through job specialisation.
â€¢ Allowed management and employees to be more objective in their judgement and approach due to rules and procedures for doing specific tasks being clearly set.
â€¢ Placed emphasis on job position, specialised employees and job continuity thus providing the organisation with long-term perspectives and quality employees.
â€¢ Surpassed the loss of any employee or even of any manager due to the nature of job specialisation. Hence in such a bureaucracy, anyone can be replaced.
Bureaucratic Management – Limitations
o Overwhelming concentration on authority discourages innovation and creativity;
o Imposed a formal and structured chain of command which is not compatible with organisations that require flexibility and rapid decision-making. This is truer today where organisations are constantly faced with a turbulent external environment of increased competition.
o the emphasis on impersonality and division of labour leads to boredom, dissatisfaction and discontent within the workforce
o rules and procedures may become so important in their own right that there is a tendency to forget the underlying processes that they are meant to make more efficient.
Henri Fayol (1841-1925) was a French industrialist and one of the most influential early management thinkers. Scientific Management was concerned with increasing the productivity of the shop floor. Classical Organisation Theory grew out of the need to find guidelines for managing such complex organisations as factories. An early attempt was pioneered by Fayol to identify the principles and skills that underlie effective management. He believed that sound management practice falls into certain patterns that can be identified and analysed. He focused on management, which he felt had been the most neglected of business operations. Based on his experience in management, he developed fourteen general principles of management:
1. Division of Work and specialisation to produce more work for less effort.
2. Authority to give orders and the power to exact obedience.
3. Discipline and respect between a firm and its employees.
4. Unity of command where an employee receives orders from only one superior.
5. Unity of direction where there is only one central authority and one plan of action.
6. The general interest is superior to individual interests.
7. Remuneration is fair and provides satisfaction both to the employee and employer.
8. There is centralisation, where there is always one central authority.
9. There is a scalar chain, where a chain of authority exists from the highest level to the lowest ranks.
10. Order, where the right materials and people are in the right place for each activity.
11. Equity, kindliness and justice are seen throughout the organisation.
12. Stability and tenure of personnel to maintain a stable work force.
13. Initiative is encouraged to motivate employees.
14. Esprit de Corps is recognised as important, and teamwork is encouraged.
Before Fayol, it was generally believed that “managers are born, not made”. Fayol insisted, however, that management was a skill like any other – one that could be taught once its underlying principles were understood.
Chester Barnard (1886-1961) developed the concepts of strategic planning and the Acceptance theory of Authority, which states that managers only have as much authority as their employees allow them to have. It suggests that authority flows downward, but depends upon acceptance by the subordinate. Barnard considered that the acceptance of authority depends on four conditions:
1) That the employee understands what the manager wants them to do.
2) That the employee is able to comply with the directive.
3) That the employee thinks that the directive is in line with organisational objectives.
4) That the employee does not think that the directive is contrary to their personal goals.
Barnard believed that each person has a zone of indifference within which the individual will willingly accept orders without consciously questioning authority and that it is up to the organisation to broaden each employee’s zone of indifference.
Advantages of Administrative Management
o Viewed management as a profession which can be trained and developed.
o Offered universal managerial guidelines.
o Promoted communication between managers and employees.
o Highlighted the needs of employees through the unity of command, unity of direction, equity, etc.
o Encouraged employees to act on their own initiatives.
Disadvantages of Administrative Management
â-ª Lacked consideration for organisation’s environmental, technological and personnel factors, due to the blind application of Fayol’s concepts.
â-ª Fayol’s recommendations are too experience-based and therefore not driven by formal research. Hence its concepts have not been tested.
Although these schools, or theories, developed historical sequence, later ideas have not replaced earlier ones. Instead, each new school has tended to complement or coexist with previous ones. The ideas of classical theorists have many applications in the management of today’s organizations although with some modifications. Many of the internal challenges faced by managers during earlier periods were similar to those faced by managers today. For example, Taylor’s concern for the productivity of employees is still shared by managers. Even today, the Scientific Management Theory is still relevant. While not as popular as in the past, this method of job design is still used. This sort of task-oriented optimization of work tasks is nearly ubiquitous today in industry, and has made most industrial work menial, repetitive, tedious and depressing; this can be noted, for instance, in assembly lines of car manufacturers and fast-food restaurants like McDonald’s and KFC. McDonald’s divides its complete operation into a number of tasks such as supervising, cooking operations or operating a deep fryer and assigns people to carry out these tasks. The modern mass car assembly lines pour out finished products faster that Taylor could have ever imagined. In addition, its efficiency techniques have also been applied in the training of surgeons.
Today’s armies employ Scientific Management. Of the key points listed – a standard method for performing each job, select workers with appropriate abilities for each job, training for standard task, planning work and eliminating interruptions and wage incentive for increase output – all but wage incentives for increased output are used by modern military organizations. Wage incentives rather appear in the form of skill bonuses for enlistments. Furthermore, industrial engineers today are still taught the methods of Scientific Management including time and motion studies, job-tasks analysis, wage-incentive determination and detailed production planning with respect to the field of operation research and management.
The Bureaucratic Management is still used in the USA by service-based organizations such as libraries. One concrete example where Fayol’s Bureaucratic Management ideas are still in use is at the Wichita State University Libraries. Bureaucracy is also still being used in the US Postal Service.
In Mauritius, mass production lines and piece rate systems are used in the garment and manufacturing industries. Another industry where the Classical Management Theories are still in use is in the sea-food hub, more specifically at the Mauritius Tuna Processing Plant.
Mauritius and its economy are at a pivotal point. The pace of change is exhilarating. That is why in his budget speech 2008-2009, Hon. Rama Sithanen, Minister of Finance pointed out the urgency for our economy to shift from the traditional pillars to a service-oriented economy and to a knowledge-based society. For instance, he advocated that the ICT sector must add to the pillars of the Mauritian economy. Business leaders expect ICT to have a greater impact on their business. The industries experiencing the greatest change are the technology, telecommunications and financial services. The Minister also stressed on the development of the SMEs as he formulated that in terms of job creation, new jobs will come mostly from small businesses and medium-sized companies.
But since the formulation of the Classical Management Theories in the 18th century, the economic landscape has changed. Businesses do not exist in a vacuum. They are in fact open systems with constant and dynamic interaction with the environment. Today’s business environment is global and highly competitive. Managers are becoming increasingly aware of the effects of the business environment
There are two aspects of the business environment, namely the internal and the external environment. The internal environment relates to those factors that the organisation can relatively control. These are the owners, employees, customers, suppliers, authorities and pressure groups. But the external environment that constitutes the PEST (Political, Economical, Social and Technological) factors is relatively remote from what the organisation can control. Without the ability to analyse the strength and weaknesses of the internal and the opportunities and threats of the external environments, managers risk making decisions that are not in the best interest of the organisation. At the same time, worldwide concern about the natural environment has emerged. Current natural environmental concerns are pollution, climate changes, ozone depletion and other global issues like biodiversity, adequate water supplies, population and food security. As McDonald’s concluded, today’s managers have to be concerned not only with the scientific facts but with public perception.
Today’s business environment is characterized with changes, innovations and uncertainty. It is becoming more challenging amid global economic slowdown and turmoil in the financial sector. Businesses must at all cost adapt or die. Out of five businesses experiencing a disaster or extended outage,
a) Two never re-open their doors.
b) One of the remaining three will close within two years.
The business environment is exceedingly tough and competitive. Competition is intensifying in many sectors. Technology is constantly creating new opportunities and threats. There are changes to the regulatory environment: the advent of the Equal Opportunities Act being a clear example. Customer tastes are also changing – providing a moving target. Smart companies operating in highly competitive business environments are working very hard to improve efficiency and productivity, test high-yielding new initiatives, and differentiate themselves from competitors.
Command and Control Management style (as stated in the Classical Management Theories) is effective in an environment where both change and competition are limited and there is plenty room for error (high profit margins). Such is not the case in the age of computing and communications. In today’s business environment, things change very quickly and profit margins are reducing. In addition, more things are happening on a continuing basis. Because of the speed at which things are changing, it is important to push decision-making down in the organization to the level that has all of the information at the time when a decision must be made. This calls for very different management attitudes, it demands a democratic and flexible point of view and of course accountability must be delegated. All these are not present in the Classical Management Theories.
Rapid change that is sweeping through every aspect of the business environment today prompts managers to rethink the ways they do things. Although the Classical Management model has evolved quite a bit, it is still geared to a rigid structure and command-and-control mentality. This model was well tailored to an environment where change was slow and evolutionary rather than rapid and revolutionary. It helped organise processes and foster a sense of accountability, order and discipline. What it lacks is flexibility, making the organisation irresponsive to continuous internal and external environment changes. We have reached a limit to what can be accomplished using the Classical Management approaches. But by changing the way managers do things, that constraint can be removed. This is not to say that the basics of Classical Management should be ignored, but they are just not enough to get the job done in today’s business environment.
Although Classical Management Theories are quite useful in the early stages of economic development, they are not an adequate explanation of how to administer organisations in a complex, developed society. When it comes to seeking cost, efficiency, productivity and profitability improvements, the Classical Management Theories have a limited field of action. Managers need to get used to the idea that what worked yesterday won’t tomorrow. They need to work on tomorrow today. When the business environment becomes more challenging, it is actually an opportune time for managers to think about ways to reinvent their business. We find that new managers are willing to investigate innovative solutions to business problems because they are unhampered by the limitations of tools and methods of the past. It is not so much that established managers are not willing to change; it has more to do with that fact that they are using methods that were designed for different circumstances. And they worked. So, established managers have to be prepared to discard something that has been effective for them. Managers need to use today’s tools to solve today’s problems. They must be willing to learn about new ways of doing things.
To compete successfully in the global arena, managers must now act as entrepreneurs and create new business models – rethink, re-plan, strategize, innovate and learn continuously. Innovation is the most important source for organisations to gain competitive advantage, and advanced innovation management is critical to a business’s sustainable development. Classical Management theories can’t catch up with the dramatic changes of the business environment. Once-reliable guides for managerial actions no longer exist. In an environment virtually bereft of the old rules of conducting business, there is no safety net. Every process, procedure, rule of thumb and standard ratio is being challenged, re-engineered and morphed into a new form. This fundamental change has brought a daunting new reality to the challenge of growing and managing business.
Today, organizations are mostly influenced by the external environment (fierce market share competition, continuous technology change, globalisation, hiring and retaining qualified executives and front line workers) that often fluctuate over time. Yet Classical Management Theories present an image of an organisation that is not shaped by external influences. Classical Management Theories are now gradually fading for the principal reason that people and their needs are considered by Classical theorists as secondary to the needs of the organisation. Nowadays, The Scientific approach is very seriously challenged by Human Resource Management. Furthermore, The Bureaucratic Management is fast giving way to the Matrix Structure in organisations. However, Classical Management theories are important because they introduced the concept of management as a subject for intellectual analysis and provided a basis of ideas that have been developed by subsequent schools of management thought.