Classics of Organization Theory - MGMT 211

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CHAPTER l

lassical Organization Theory

o single date can

be

pinpointed as the beginning of serious thinking

about

how or-

ganizations work and how they

should be structured

and managed. One can trace

writings about management and organizations as far

back

as the known origins of com-

merce. A lot can be learned from the early organizations of the Muslims, Hebrews, Greeks,

and Romans. f we were to take

the

time, we could make

the

case that much of what we

know about organization theory has its origins in ancient and medieval times. After all,

it was Aristotle who first

wrote

of the importance of culture to management systems, ibn

T aymiyyah who used the scientific method

to

outline the principles of administration

within

the

framework of Islam, and Machiavelli who gave

the

world

the

definitive

analysis of the use of power.

In

order

to

provide

an

indication

of

organization

theory's

deep

roots

in

earlie r eras, we

offer two examples of ancient wisdom on

organization management.

The first of our ancient

examples is from the Book of Exodus,

Chapter

18 (see

the

next page), in which Jethro,

Moses' father-in-law, chastises Moses for failing

to

establish an organization through which

he could delegate his responsibility for

the

administration of justice. In Verse 25, Moses ac-

cepts Jethro's advice;

he chose

able

men out of

all Israel,

and made them

heads

over the

people, rulers of thousands, rulers of hundreds, rulers of fifties, and rulers of tens. Moses

continued

to

judge the

hard

cases, but his rulers judged every small

matter

themselves.

Frederick

Winslow

Taylor would

later develop this

concept of management by exception

for modern audiences.

In

the second ancient example

(the

first selection in this

chapter,

Socrates Discov-

ers Generic Management ), Socrates anticipates

the

arguments for generic management

and principles of management as he explains

to

Nicomachides that a leader who knows

what he

needs, and

is

able

to provide

it, [can]

be

a good president, whether he

have

the di-

rection of

a chorus, a family, a city, or an army

(Xenophon,

1869). Socrates lists and dis-

cusses the duties of all good presidents of public and

private institutions and

emphasizes

the similarities.

This is

the first known statement that organizations as

entities

are basically

al ike-and

that

a

manager who could cope

well

with one

would be equally

adept at

coping

with others-even though their purposes and

functions might be

widely disparate.

Although it

is

great

fun

to

delve

into

the

wisdom of the

ancients, most

analysts of the

origins of organization theory view the

beginnings

of the factory system in

Great

Britain

in the eighteenth century as the birthplace of

complex

economic organizations

and,

con-

sequently, of

the

field of organization theory. Classical organization theory,

as

its name im-

plies, was the first theory of its kind,

is

considered

traditional, and continues

to

be the base

upon which

other

schools

of

organization theory have built. Thus,

an

understanding

of

classical organiza tion

theory is

essential not

only

because of its historica l

interest but

also,

more importantly, because

subsequent

analyses and

theories

presume a knowledge of it.

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lassical

rganization Theory

Exodus Chapter 18

13 And it came to pass on

the

morrow,

that

Moses sat to judge

the

people: and the people

stood by Moses from

the

morning

unto the

evening.

14 And

when

Moses' father-in-law saw all

that

he did to

the

people, he said,

What is

this

thing

that

thou doest to the people? why sittest thou thyself alone, and all the people stand by

thee from morning

unto

even?

15 And Moses said unto his father-in-law, Because the people come unto me to inquire

of

God:

16 When they have a matter, they come

unto

me; and I judge between one and another,

and I do make

them

know the statutes of God, and his laws.

17 And Moses' father-in-law said unto him, The thing

that thou

doest

is not

good.

18

Thou

wilt surely wear away both thou, and this people

that is

with thee: for this thing

is

too heavy for thee:

thou

art

not

able to perform it thyself alone.

19 Hearken now unto my voice, I will give thee counsel, and God shall be with thee: Be

thou

for

the

people to God-ward,

that thou

mayest bring

the

causes

unto

God:

20 And thou shalt teach

them

ordinances and laws, and shalt shew

them the

way wherein

they must walk,

and the

work

that

they must do.

21

Moreover thou shalt provide

out of

all

the

people able men, such as fear God,

men of

truth,

hating

covetousness;

and

place

such

over them,

to

be

rulers

of

thousands, and rulers

of

hundreds, rulers

of

fifties, and rulers

of

tens:

22 And let them judge

the

people at all seasons and it shall be, that every great matter they

shall bring

unto

thee,

but

every small matter they shall judge: so shall

it

be easier for thyself,

and they shall bear the burden with thee.

23 f

hou

shalt do this thing, and

God

command thee so,

then thou

shalt be able to endure,

and all this people shall also go to their place

in

peace.

24 So Moses hearkened to the voice

of

his father-in-law, and did all

that he had

said.

25 And Moses chose able men out of all Israel, and made them heads over the people, rulers

of

thousands, rulers

of

hundreds, rulers

of

fifties, and rulers

of

tens.

26 And they judged

the

people

at

all seasons: the hard cases they brought unto Moses,

but

every small matter they judged themselves.

27

And

Moses let his father-in-law depart; and

he

went his way into his own land.

The classical school dominated organization theory into the 1930s and remains

highly influential today (Merkle, 1980). Over the years, classical organization theory ex-

panded and matured. Its basic tenets and assumptions, however, which were rooted in the

industrial revolution

of

the 1700s and the professions

of

mechanical engineering, indus-

trial engineering, and economics, have never been abandoned. They were only expanded

upon, refined, adapted, and made more sophisticated. These fundamental tenets are:

1.

Organizations exist t o accomplish production-related

and

economic goals.

2.

There is one

best way to organize for production, and

that

way

can

be found through

systematic, scientific inquiry.

3. Production

is

maximized through specialization

and

division

of

labor.

4. People

and

organizations act

in

accordance with rational economic principles.

The

evolution

of

any theory must be viewed

in

context.

The

beliefs

of

early manage-

ment

theorists about how organizations worked or should work were a direct reflection

of

the societal values of their t imes-and

the

times were harsh.

It

was well into the twen-

tieth century before the industria l workers of

the

United States and Europe began to enjoy


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even limitJ.S one of the pillars of Smith's inr

visible hand" tnarket mechnni8rtl in which the greutest

W(>uld go

to

those

v,·ho

v,'ete

the 1nost efficient in

tho.:

cornpetitlve marketplace. Tradition;;] pin makers

could

produce

only a {e;v dozen pins a day.

\Xi'hen

org:;i_nizcd in < fact.,ity \Vith each worker pcrfor111ing a

litnite.--l

operation, rhey could produce tens

of

tl1ow;ut\Js a

dfly.

Sn1ith's

()f

rhe Division of

Labour''

is

reprinted here coining as it did at

the

da\Vn of the in


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30

Classical

Organization Theory

operationally defined 1776, the year in which

Wealth

of Nations was published, as the

beginning point of organization theory as an applied science

and

academic discipline.

Besides, 1776 was a good year for

other

events as well.

In 1856, Daniel C McCallum

(1815-1878),

the visionary general superintendent

of

the

New

ork

and Erie Railroad, elucidated general principles of organization that may be

regarded

as

settled and necessary. His principles included division of responsibilities,

power commensurate with responsibilities, and a reporting system that allowed managers

to know promptly if responsibilities were faithfully executed and to identify errors and

delinquent subordinates. McCallum, who is also credited with creating the first

modem

organization chart, had an enormous influence

on

the managerial development of the

American railroad industry.

In systematizing America's first big business before the Civil War, McCallum provided

the model principles

and

procedures of management for the big businesses that would fol-

low after the war. He became so much the authority on running railroads that, as a major

general during the Civil War, he was chosen to

run

the Union's military rail system.

Although

McCallum was highly influential as a practitioner, he was no scholar,

and

the

only coherent statement

of

his general principles comes from

an

annual report

he

wrote for

the

New ork and Erie Railroad. Excerpts from his Superintendent's Report

of

March 25,

1856, are reprinted in this chapter.

During

the

1800s, two practicing managers in

the

United States independently dis-

covered that generally applicable principles of administration could be determined

through systematic, scientific investigation-about thirty years before Frederick Winslow

Taylor's

Principles of Scientific Management

or Henri Fayol's

General

and

Industrial

Manage-

ment

The

first,

Captain

Henry

Metcalfe

(1847-1917)

of the

United

States Army's Frank-

ford Arsenal in Philadelphia, urged managers to record production events and experiences

systematically so that they could use the information to improve production processes. He

published his propositions in The Cost of Manufactures and

the

Administration ofWorkshops

Public

and

Private (1885), which also pioneered in the application of prescientific manage-

ment methods to the problems of managerial control and asserted that there is a science

of administration'' based upon principles discoverable by diligent observation. Although

Metcalfe's work

is

import ant historically, it

is so

similar to that

of

Taylor and others that it

is not

included here

as

a selection.

The

second prescientific management advocate of

the

1880s was Henry R. Towne

(1844-1924),

cofounder and president of

the ale &

Towne Manufactur ing Company.

In

1886 Towne proposed that shop management was of equal importance to engineering

management

and

that the

American

Society

of

Mechanical Engineers (ASME) should

take a leadership role in establishing a multicompany, engineering/management data-

base

on

shop practices or

the

management of works.

The

information could then be

shared among established and new enterprises. Several years later, ASME adopted his pro-

posal.

The

paper he presented to the society, The Engineer

as

Economist, was published

in Transactions o the American

Society

o Mechanical Engineers (1886) and is reprinted here.

Historians have often considered it the first call for scientific management.

Interestingly, Towne had several significant associations with Frederick Winslow

Taylor.

The

two

of them

were fellow draftsmen

at the

Midvale Steel works during

the

1880s.

Towne gave Taylor

one

of his first true opportunities to succeed at applying scientific

management principles at

ale

Towne in 1904. Towne also nominated Taylor for

the


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Classical Organization Theory 3

presidency of ASME in 1906

and

thus provided him with an

international

forum for

advocating scientific managemen t. Upon election, Taylor promptly reorganized

the

ASME

according

to

scientific

management

principles.

While the

ideas

of Adam Smith,

Frederick Winslow Taylor,

and

others are still

dominant

influences on the design and management of organizations, it was Henri Fayal

(1841-1925), a

French

executive engineer, who developed the first comprehensive theory

of management.

While

Taylor was tinkering with the technology employed by the indi-

vidual worker, Fayal was theorizing about all of the elements necessary to organize and

manage a major corporation. Fayol's major work, dministration

Industrielle et

Generale

(published in France in 1916), was almost ignored in

the United

States

until

Constance

Starr's English translation, General and

Industrial Management

was published in 1949.

Since

that

time, Fayol's theoretical

contributions have

been

widely recognized,

and

his

work

is

considered fully

as

significant

as that

of Taylor.

Fayal believed that his concept of management was universally applicable

to

every

type

of

organization.

Whereas he had

six principles-technical (production

of

goods),

commercial (buying, selling, and exchange activities), financial (raising

and

using capital),

security

(protection

of property and people), accounting, and managerial (coordination,

control, organization, planning, and command

of

people)-Fayol's primary interest and

emphasis was on his final principle, managerial. t addressed such variables as division of

work, authority and responsibility, discipline,

unity

of command,

unity

of direction, subor-

dination of individual interest

to

general interest,

remuneration

of personnel, centraliza-

tion, scalar chains, order, equity, stability of

personnel

tenure, initiative,

and

esprit de corps.

Reprinted

here is

Fayol's

General

Principles

of

Management, a

chapter

from his

General

and

Industrial Management.

About 100 years after Adam Smith declared the factory to be the most appropriate

means of mass production, Frederick Winslow Taylor and a group of his followers were

spreading

the

gospel that factory workers could be much more productive if their work

were designed scientifically. Taylor,

the

acknowledged father of

the

scientific

management

movement, pioneered the

development

of time

and

motion studies, originally

under the

name Taylorism, or

the

Taylor system. Taylorism, or its successor, scientific manage-

ment, was

not

a single invention but rather a series

of

methods and organizational

arrangements designed by Taylor and his associates

to

increase the efficiency and speed of

machine-shop production. Premised on the notion that there was one best way for ac-

complishing any given task, Taylor's scientific

management

sought to increase output by

using scientific methods to discover the fastest,

most

efficient, and least fatiguing produc-

tion

methods.

The

job

of the

scientific manager,

once

the

one bes t way was found, was

to

impose

this procedure

on

his or

her

organization. Classical organization theory derives from a

corollary of this proposition.

f

here was

one best

way

to

accomplish any given production

task,

then

correspondingly, there must also be

one

best way

to

accomplish any task

of

social organization-including organizing firms. Such principles

of

social organization were

assumed

to

exist

and to

be waiting

to

be discovered by diligent scientific observation

and

analysis.

Scientific management, as espoused by Taylor, also contained a powerful puritanical

social message. Taylor ( 1911) offered scientific management as the way for firms

to

increase

profits, get rid of unions, increase

the thrift

and virtue of

the

working classes, and raise


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Classical Organization Theory

productivity so that the broader society could enter a new era of harmony based

on

higher

consumption of mass-produced goods by members of the laboring classes.

Scientific management emerged as a national movement during a series of events in

1910.

The

railroad companies in

the

eastern states

of the

United States filed for increased

freight rates with

the

Interstate Commerce Commission.

The

railroads

had

been receiving

poor press-they were being blamed for (among many other things) a cost-price squeeze

that was bankrupting farmers-and

the

rate hearings received extensive media coverage.

Louis D. Brandeis, a self-styled populis t lawyer who would later be a distinguished Supreme

Court justice, took the case against the railroads without pay. Brandeis called in Harrington

Emerson, a consultant who had systematized the Santa

Fe

Railroad, to testify that the

railroads did

not

need increased rates: they could save a million dollars a day by using

what

Brandeis initially called scientific management methods (Urwick,

1956).

At

first,

Taylor was relrn;:tant to use the phrase because it sounded too academic. But the ICC hear-

ings meant that the national scientific management boom was underway, and Taylor was

its leader.

Taylor

had

a profound-almost revolutionary-effect on the fields of business and

public administration. He gained credence for the notion that organizational operations

could be planned and controlled systematically by experts using scientific principles. Many

of

Taylor's concepts and precepts are still in use today.

The

legacy of scientific management

is substantial. Taylor's best-known work is his

1911

book

The Principles o Scientific Man-

agement but he also wrote numerous

other

accounts on

the

subject. Reprinted here is an

article, also entitled The Principles of Scientific Management, which was the summary

of an address Taylor gave

on

March 3, 1915, two weeks before his death.

Several of Taylor's associates subsequently built reputations for innovations that uti-

lized principles of scientific management, including Frank Gilbreth

(1868-1924)

and

Lillian Gilbreth (1878-1972), leaders in developing

the

tools and techniques

of

time and

motion study including

the

therblig (Spriegel Myers,

1953 ;

Henry Laurence

Gantt

(1861-1919), who invented

the Gantt

chart for planning work output (Alford, 1932); and

Carl 0. Barth (1860-1939) who, among his other accomplishments, in l908 convinced

the dean of the new Harvard B4siness School to adopt Taylorism as the foundation con-

cept of modern management (Urwick, 1956). Frank and Lillian Gilbreth also achieved

wide public recognition for the book

(1948)

and movie, Cheaper by the Dozen which

described

the

couple's efforts to raise their twelve children using scientific management

principles and practices.

In

contrast with the fervent advocates of scientific management, Max Weber

( 1864-1920) was a brilliant analytical sociologist who happened to study bureaucratic

organizations.

t

is

hardly worth

mentioning

that

bureaucracy has emerged as a

dominant

feature of

the

contemporary world. Virtually everywhere one looks in

both

developed and

developing nations, economic, social, and political life is influenced extensively by

bureaucratic organizations. Bureaucracy refers to a specific set of structural arrangements. t

is also used to refer to specific patterns of behavior-patterns that are

not

restricted to for-

mal bureaucracies. t is widely assumed that the structural characteristics of organizations

properly defined as bureaucratic influence the behavior of individuals, whether clients or

bureaucrats, who interact with them. Contemporary thinking along these lines began with

the work of Max Weber. His analysis of bureaucracy, first published in

1922,

remains the


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->ir


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(}rganizathln

Theory

Merkle, J .c\.

(1980). Management

llnd

ideology.-

The

fogOJ:y of tlte i11tertk11fowd scientific man0-_gen1ent

11wve1nent.

Berkeley,

CA: University of California Pre' s,

Metcalfe, H.

\

1885 ).

The

cosr

of

m11iiuf.1ctures arnl the

admlniswatiori of

'l.l.'orkshops.

pulilic and private.

New

Wdey.

Srnith, A. (1776).

Jf

the division oflahour. n n inquiry into the

nature and

causes of he vJealth of UV

tir)l1s (ch1p- 1. PP- 5--15). Printed

for

W. Strahan

and

T. C:adell

in

th


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Classics of Organization Theory - MGMT 211