Overview
This lecture covers the classical theory of administration, focusing on Henry Fayol’s contributions, the key functions and principles of classical management, its main proponents, and criticisms.
Origins and Key Concepts
- The classical theory of administration was developed by Henry Fayol and published in 1916.
- Fayol emphasized management-level functions for achieving organizational efficiency, expanding on Frederick Taylor's scientific management.
- The theory focuses on organizational structure and functional coordination.
Six Basic Functions of Organization (Fayol)
- Technical: Actions related to production of goods and services.
- Commercial: Activities involving purchase, sale, and exchange of products (e.g., marketing).
- Security: Ensures safety of workers and organizational assets.
- Accounting: Deals with costs, inventories, and business statistics for financial control.
- Financial: Involves search and management of capital and company economy.
- Administrative: Coordinates, regulates, and integrates all other functions, considered the most important.
Five (later Seven) Administrative Functions
- Planning: Visualizing the future and defining strategies.
- Organizing: Building material and social structure (hiring, acquiring resources).
- Leading: Guiding and motivating staff towards objectives.
- Coordinating: Aligning individual efforts into collective achievements.
- Controlling: Ensuring activities follow rules and taking corrective actions.
- Reporting (added by Gulick): Keeping management informed.
- Budgeting (added by Gulick): Managing financial planning.
Fourteen Principles of Classical Management
- Division of work: Task specialization for efficiency.
- Authority and responsibility: Leaders must give orders and take responsibility.
- Discipline: Obey rules and foster good relationships.
- Unity of direction: One plan, one leader per group.
- Unity of command: Employees receive instructions from one superior.
- Subordination of individual interest: Organizational interests above personal interests.
- Remuneration: Fair and equitable compensation for all employees.
- Centralization: Decision-making concentrated at the top, but some delegation is possible.
- Hierarchy: Clear chain of command and authority.
- Order: Proper placement of personnel and resources.
- Equity: Fairness and kindness in management decisions.
- Staff stability: Maintain consistent staffing to ensure productivity.
- Initiative: Allow employees creative input and autonomy.
- Group spirit: Encouragement of teamwork and cooperation.
Characteristics and Exponents
- Founded during the Industrial Revolution, aiming at maximum administrative efficiency.
- Introduced concepts such as formal/informal organizations, staff, and line.
- Main exponents: Henry Fayol (founder), Lyndall Urwick (consolidated Fayol's principles), Luther Gulick (added reporting and budgeting functions, POSDCORB).
Criticisms of Classical Theory
- Lacks experimental validation of ideas.
- Prioritizes organizational results over human elements.
- Sometimes dehumanizes workers, treating organizations as "machines" with repetitive actions.
Key Terms & Definitions
- Classical theory of administration — An early management theory focusing on organizational structure and functions for efficiency.
- Administrative functions — Key managerial activities: planning, organizing, leading, coordinating, controlling (plus reporting and budgeting).
- POSDCORB — Acronym for Plan, Organize, Staff, Direct, Coordinate, Report, and Budget.
- Formal organization — Official, structured relationships within a company.
- Informal organization — Unofficial relationships and social structures that form naturally among employees.
Action Items / Next Steps
- Review Fayol’s 14 principles and 6 functions for exam preparation.
- Compare classical theory with Taylor's scientific management in your notes.
- Prepare examples illustrating each of Fayol’s functions and principles.