The Classical Organisation Theory

Principle & Practice of Management

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The Classical Organisation Theory

The Classical Organisation Theory

The term “classical” in the English language refers to something traditionally accepted or long established. The beginning of the classical organisation theory can be traced back to the heydeys of industrial transformation in the second half of the nineteenth century when some perceptive observers felt obsessed with the problem of growing size of the industries. In the beginning, the large scale operations were carried out by the organisations with the help of unskilled and semi-skilled people but later on, the technological development changed the industrial scene completely. Many new economic, social and technical problems sprang up. The need for solving these problems called for the development of organisational forms and management practices which were quite different from the traditional ones. This phenomenon changed the individualistic nature of organisation and management into mechanical nature. This view was current through the first half of the twentieth century.
The classical writers viewed the organisation as a machine and human beings as different components of that machine. Their approach has focused on input-output mediators and given less attention to constraining and facilitating factors in the external environment. Workers were considered to be driven by economic considerations who could be solely motivated by economic rewards. While managers were regarded as kind-hearted, rational, intelligent and qualified people. Because an organisation was treated as a machine, it was felt that its efficiency could be increased by making each individual efficient, so that both the organisation’s and the workers’ interests might be served. Increased human productivity would facilitate the organisation in achieving its goals and objectives while on the other hand workers would get higher wages in return for their increased
productivity. Thus, management is to emphasise on the improvement of the machine in order to get higher productivity from the people at the minimum expense. The emphasis was on the specialisation of performance and co-ordination of various activities.

Classical Organisation Theory

Assumptions of the Classical Organisation Theory

The classical organisation theory was based on the following assumptions:
1. The relationship between workers and management was established through formal communications, defined tasks and accountability and formalised procedures and practices to minimise conflict between them.
2. Workers are considered to be driven by economic considerations who can be motivated basically by economic rewards. Money is considered the main motivator.
3. The managers were characterised as rational, kind-hearted, intelligent and qualified personnel but they are supposed to deal with the workers firmly in the system.
4. The classical organisation theory assumes that the organisation is a machine and the people its components. In order to make any improvement in the whole system, internal factors were considered and less attention was given to factors in the external environment which may constrain and facilitate the system.
5. It has been assumed by the theory that both workers and managers are rational. Workers can easily perceive that their interests can be served only by increasing the productivity and getting more wages for higher productivity, on the other hand, management gets the fruits of higher productivity. Management tries to find out best ways of doing a job by
introducing new improvements in machines and devoting time to such technical engineering and administrative aspect of organisation which can make the man produce as much as he can with minimum expenses so that workers can contribute more to the organisation and earn more for themselves in return.
6. The classical organisation theory puts special emphasis on the error and particularly on the detection of error and its correction after it happens.
7. The classical organisation theory assumes that man is relatively homogeneous and unmodifiable while designing the jobs and in picking the extra pairs of hands.
8. The classical organisation theory, in its essential character, is centralised. The integration of the system is achieved through the authority and control of the central mechanism.

Two Streams of the Classical Organisation Theory

Classical theorists were divided in opinion. The two streams are scientific management and administrative management. The scientific management stream of the organisation theory emphasised on the efficiency of lower levels of the organisation while administrative stream focused on the efficiency of higher levels. F.W. Taylor is called the father of scientific management approach. Taylor and his followers insisted upon dividing and sub-dividing the tasks through time and motion studies because he was of the view that objective analysis of facts and collection of data in the workplace could provide the basis for determining the best way to organise the work. Thus, they investigated the effective use of human beings in industrial organisations and studied primarily the use of human beings as adjuncts to machines in the performance of routine tasks. The approach taken by
this theory is quite narrow and encompasses primarily psychological variables. As such this theory is also referred to as ‘Machine Theory’ or ‘Physiological Theory.’ The scientific management group was mainly concerned with the tasks at floor or operative levels, and these tasks were quite different from other tasks in the organisation because:
1. These tasks are largely repetitive in nature so that the daily activities of a worker can be sub-divided into a large number of cyclical repetitions of essentially the same or closely related activities.
2. These tasks do not require any problem-solving activity by the workers who handle them. Thus, more attention was given in standardising the working methods. The second stream is the administrative stream of organisation theory emphasises efficiency at higher levels. It was concerned with the managerial organisation and process. Henry Fayol was the leader for this group. He, for the first time, studied the functions and laid down principles of management in a systematic manner for the guidance of managers. The other contributors were Gulick, Oliver Sheldon, Mooney and Reiley, Berwick, Weber and others. The theorists have viewed the central problem as being one where there must be the identification of tasks necessary for achieving the general purpose of the organisation and of the grouping or departmentalizing, to fulfil those functions most effectively.
These two approaches are similar in recognising the fact that organisation is a closed system, however, there are differences between the two.

Key Characteristics of the Classical Organisation Theory

Scott and Mitchell have pointed out four key pillars on which the classical organisation theory seems to have been built. They are:
1. Division of Labour: Division of labour refers to the division of tasks of an organisation into sub-tasks and then allow these sub-tasks or sub-parts to individuals. The allotment should be in such a way that each individual would have a small task so that he can specialise himself in that part with a view to improving the efficiency of the organisation while at the same time, the total of individuals’ tasks should add up to the organisation’s goals and objectives. The approach rests upon the simple assumption that the more a particular job is broken down into its component parts, the more specialised a worker can become in carrying out his part of the job and the more specialised he becomes, the more efficient the whole organisation will be. This element is the cornerstone among the four elements mentioned above because other three elements are dependent upon the division of labour.
2. The Scalar and Functional Processes: The scalar and functional processes deal with the vertical and horizontal organisation. The scalar process deals with the vertical elaboration of an organisation. In other words, it is the chain of command or the line of authority, along which authority flows from the top (chief executive) to the bottom (first line supervisor) and obligations and reporting from the bottom to the top. Each one in the organisation is told who their superiors are and who are their subordinates or to whom they are responsible and accountable for performing their job. A delegation of authority flows from this line of command. The functional process deals with the horizontal organisation, i.e., a grouping of various functions into units and clearly defining the relationship between the various heads of the units. The grouping of functions can be done on the basis of purpose, process, clientele, place and time.
3. Structure: It refers to the logical relationship of functions in an organisation arranged in order to accomplish the objectives. These relationships are a line and staff relationships. People, departments, divisions and other segments of the organisation that are authorised to determine the basic objectives of the business and assess their achievements constitute the line. The staff is that part of the organisation which assists and advises the line on matters concerning it, in carrying out its duties. For example, in a manufacturing concern, production is a line function while personnel and finance are the staff functions.
4. The Span of Control: In order to achieve the objectives, the managers are to get the work done from the unlimited number of workers in a large organisation. A manager cannot supervise an unlimited number of people. The span of control refers to the number of subordinates a supervisor can supervise effectively. Wide span yields a flat structure whereas short span results in a tall structure. Grains has developed a mathematical formula to show the numerical limitations of the subordinates, a manager can control. If an organisation is designed on the above principle, it will look like a pyramid. At the top of the structure, there is head of the organisation followed by the top executive, executives, middle managers, junior managers and at the bottom the first line supervisors. Chain of command and line of communication both flow from the top to the bottom in this structure. The line of responsibility, however, flows from bottom to top. There is no provision of upward communication in this system except in relation to the results of task performance.

Principles of Organisations under the Classical Theory

The classical theorists have developed certain principles of organisations under the guidance of managers and executives and they claim them as fundamental, essential, inevitable and universal. Though divergence of views exists, there is a considerable degree of unanimity on these principles. Fayol was the first to give principles of administration. He developed a comprehensive list of principles: (i) division of work; (ii) authority and responsibility; (iii) discipline; (iv) unity of command; (v) unity of direction; (vi) subordination of individual interests to general interests; (vii) fair remuneration; (viii) equity and a sense of justice; (ix) stability; (x) initiative; and (xi) teamwork spirit. These principles are more or less have a considerable degree of unanimity and some of these principles are still applied in organisations.

Criticisms of the Classical Organisation Theory

The classical theory suffers from various limitations. It was put under serious criticisms in the first half of the nineteenth century by the neoclassical thinkers and others. The criticisms are mainly based on the following grounds:
1. Certain Assumptions are Unrealistic: The classical theory is based on certain assumptions. These assumptions were found unrealistic and hence not applicable to organisations at a later date. The wrong assumptions, found unrealistic are:(a) Close system assumption: The classical theorists viewed the organisation as a closed system, i.e., it has no environment and hence no interaction with the outside world. They felt that the organisation structure could be created as a house, i.e., step by step. They thought, once the organisation is created, it would run smoothly and efficiently because human beings are rational and they work more for economic rewards. In this way, the model fails to consider many environmental factors which influence upon the organisation and, thus, this assumption leads to an incomplete view of actual organisational situations.
(b) A static view of the organisation: The classicists took a rigid and static view of the organisation whereas an organisation is not static but dynamic. The organisation can instantly respond to changes in the environment and adjust accordingly. The environment influences the organisation and is influenced by it. The organisation imports inputs transform them and export outputs to the environment. The adjustments are necessary keeping in view the requirements of the organisational environment and its various internal parts. Thus, the best organisational pattern should meet the external and internal requirements and these requirements are ever-changing and dynamic.
(c) Unrealistic assumptions about human behaviour: A major criticism of the classical theory is that the assumption regarding human behaviour was quite unrealistic. Human behaviour is complex in nature and not as simple as was established by the classical theorists. They lack sensibility to the behavioural dimensions of an organisation and make over-simplified and mechanistic assumptions for the smooth running of the organisation, ignoring all complexities of human behaviour at work. They assumed human beings as inert machines who performs tasks assigned to them and ignored their social, psychological and motivational aspects of human behaviour. This assumption of classical behaviourists led the workers to frustration, conflict and failure and thus subordinates man to the organisation. Human nature under this theory was also wrongly predicted, Mason Haire observed that “there are implicit assumptions about a man on which classical organisation theory seems to me to be based. He is lazy, short-sighted, selfish, liable to make mistakes, has poor judgement and may even be little dishonest.”
(d) Economic rewards are main motivators: The assumption that people at work can be motivated solely by economic rewards is wrong. Several types of research in human behaviour have contradicted this assumption. Hawthorne Experiments brought seven facts to light about several other motivational and maintenance factors that motivate people at work. Such other factors may be the formation of informal groups, the emergence of leaders beyond the chain of commands, improvement in productivity linked with better status and job enrichment, etc.
2. Criticism of Principles: The theory was not only criticised for its certain assumptions that are unrealistic in the modern industrial world but its certain principles formulated by classical theorists were also criticised. The main criticisms of classical principles are as follows:
(a) Lack of empirical research: Its various concepts and principles are developed by practitioners in management which are mainly based on personal experience and limited observation. They (principles) lack precision and comprehensive framework for analysis. No scientific method was used. Moreover, it is not clear whether these principles are action recommendation or simply definitions. Certain independent specifications are to be made in understanding the meaning of an organisation. The classicists have referred to the advantages of various organisational arrangements, their arguments are one-sided and they offer no objective criteria for selecting one method over other methods. March and Siman observed, perhaps the most crucial failure of the administrative management theory is that it does not conform to the practice. The theory tends to dissolve when put into testable form. Thus, not a single principle is applicable to all organisational situations and sometimes contradicts each other.
(b) Lack of universality: The classical theorists have claimed that these principles have universal application. This suggests that these principles can be applied in (i) different organisations, (ii) different management levels in the same organisation, and (iii) different functions of the same organisation. The empirical researchers, however suggest that none of the principles has such characteristics. Moreover, there are many principles which are actually contradictory with other principles. For example, principle of specialisation is quite in conflict with the principle of unity of command. The following are certain classical principles which are invariably questioned:
(i) Hierarchical structure: The classical theory is based upon the hierarchical structure that establishes the authority relationship between individuals in an organisation. It refers to arrangement of individuals in superiorsubordinate relationship. Today, the institutions of hierarchy based upon position within the organisation is being discounted and the technological specialisation with authority of knowledge is gaining importance.
(ii) Unity of command: The classical theory suggests that each person has one superior. This principle has now become outdated. The trend is changing and the organisation seeks help from other members who are not in their chain of command, such as staff personnel. The organisations formally provides such supervision and the members thus, work under multiple command instead of under unity of command.
3. Excessive Reliance on Strength of the Key Characteristics: The classical theorists have focused excessive reliance on the strength of four key pillars, i.e., division of labour, scalar and functional process, structure and span of control. The neoclassicists who do not entirely reject the principles of classical theory, have attacked these key pillars. Some of the more important points raised by them are:
(a) Division of labour: Division of labour is one of the key pillars of the classical theory but this tenet is criticised on the ground that there is no exclusive basis for grouping products, process, person or place, can always be used. The considerations of expertise and economy warrant different approaches in different situations. Besides, division of
labour cause depersonalisation of work at the operative level which results in loss of human relationships. Moreover, despite the fact that there is division of work among individuals and even though they may work independently of each other, the unit to which they belong specialises in a particular activity and its interdependence causes
stresses and strains. Because these individuals and units work for common goals it raises a serious problem of coordination so that work may be done efficiently, cooperatively and harmoneously. As executive of each unit is answerable to the goals set for his unit, he internalises his sub-unit goals resulting in jealously guarded functional segments in the organisation.
Division of labour, moreover, causes several human problems of work. Due to limited repetitive tasks, the workers feel boredom, monotony, psychological alienation, etc. It also fails to utilise multiple capacities of people. The classical organisation theory ignores human values such as the satisfaction of job.
(b) The scalar and functional process: The scalar and functional process raises another problem of delegation of authority and responsibility. It is assumed that the rational personal programme will help in selecting the personnel having capacities matching authority and responsibility in a particular position. But the neoclassicists are of the view that
there is no measuring rod for measuring the capacity. Besides, in an organisation, only capacities do not work, there are so many other kinds of overlays which affect the decision-making process. Moreover, as March and Siman have pointed out, in most organisational situations, people are not looking for any optional solution but they require ‘satisfying’ solution, i.e., a solution that meets the requirements.
(c) Structure: Classicists have laid down certain principles which, if followed will lay down a neat and perfect organisation structure, but the human behaviour disrupts the best-laid organisation plans. Research showed that major conflicts between line and staff personnel in the organisation were experienced because jobs are becoming increasingly specialised have required a higher knowledge context. It can be felt if everything had worked in a predetermined way, there would have been no need of specialised control agencies, or organisation structure and it was the only cause for the development of control agencies.
(d) The span of control: The classical approach suggests a narrow span of control specifying the number of subordinates to 5-6 at a higher level and 20 at the bottom. But the view of neoclassicists favours a wider span of control having a large number of subordinates under one supervisor. According to them, there are several considerations, such as the abilities of supervisor and subordinates, nature of work, time schedules, geographic dispersion, etc. The ability to handle the responsibilities increases with the increase in the level of education.
4. Bureaucratic Behaviour: Weber’s ‘ideal’ bureaucracy, the main constituent of the classical theory, suggests the strict adherence to rules and regulations through the mindless application of the letters of the rule. The scope of individual initiative and contribution to the organisation goal is thus limited. The result is red-tapism and observation of rules and regulations becomes the main objective and the objectives for which these rules and regulations are formed, are forgotten. Robert K. Morton has rightly observed that the rules and procedures may take positive values and become ends rather than means to ends and the decision-making tends to become a routine application of precedents with little attention to alternatives not previously experienced. Today when problem-solving ability, innovativeness and creativity are required, the bureaucratic approach appears to be inadequate.
5. Neglect of Human Factor for Focus on Anatomy of Organisations: The classical theory is devoted to the specialisation of different parts of the organisation to maximise output with the use of minimum input. The classicists concentrate their views along with the division of labour, organisation structure, a grouping of activities and span of control, etc. but not with its effects on the interrelationships. It is a need model and assumes action and communication will flow uninterrupted. They do not envisage the development of informal groups and their leaders who control the behaviour of their members. According to neoclassicists, there is no scope for emotions and sentiments and no conflicts due to elaborate job descriptions, policy specifications, rules and regulations, clear-cut authority and responsibility, etc. under the classical theory. In this way, it recognises tasks and not the people.
6. Little Scope for Integration: The classical organisation theory provides little scope for integrating people with the organisation. The goals are set at the top without consulting the subordinates who are actually, the real executors. The decision-making is highly centralised. The classical organisation theory concentrates too much of authority at the top of the people at the lower level are considered to be the‘inferior lot.’
The various criticisms of the classical organisation theory should not lead one to feel that it is a useless theory and does not offer any guidance for managerial action in an organisation. In fact, still, there are many classical principles which are applied successfully in many organisations. It shows that though not much, the classical theory has its validity in designing an organisation. Scott observes, “It would not be fair to say that the classical school is unaware of the day-to-day administrative problems of the organisation. The classical organisation theory has relevant insights into the nature of an organisation, but the value of this theory is limited by its narrow concentration on the formal anatomy of the organisation.”