Strategic Management: Formulation and Implementation

Administrative Theory

Whereas scientific management focused on the productivity of the individual worker, the administrative theory focused on the total organization. Among the well-know contributors to this theory were Lyndall Urwick, Chester Barnard, Alvin Brown, Henry Dennison, Oliver Sheldon and Max Weber. However, the most notable of all contributors was Henry Fayol. His book, General and Industrial Management, had a major impact on the emerging field of management. 

He discussed 14 general principles of management. These principles follow in the order developed by Fayol:

 1. Division of labor. Specialization of labour results in increased productivity. Both managerial and technical work are amenable to specialization.

 2. Authority. Authority was defined by Fayol as the "right to give orders and the power to exact  obedience". It is needed to carry out managerial responsibilities.

3. Discipline. Employees must respect the rules that govern the organization.

4. Unity of command. Employees should receive orders from only one superior.

5. Unity of direction. Each group of activities in an organization should be grouped together under one head and one plan.

6. Subordination of individual interests to the general interest The interests of one person should not be placed before the interests of the organization as a whole.

7. Remuneration. Compensation should be based on  systematic attempt to reward good performance.

8. Centralization. The degree to which centralization or decentralization should be adopted depends on the specific organization, but managers should retain final responsibility to do the tasks successfully.

9. Scalar chain. A chain of authority should extend from the top to the bottom of the organization. This chain implements the unity-of-command principle and allows the orderly flow of information.

10. Order. Human and material resources must be in the right place at the right time.

11. Equity. Employees should be treated as equally as  possible.

 12. Stability of personnel. Successful firms usually had a stable group of employees.

 13. Initiative. Employees should have the freedom to take initiative.

14. Esprit de corps. Managers should encourage a sense of unity of effort through harmony of interests.

Chester I. Barnard (1886-1961)

 Chester Barnard made significant contributions to management in his book, The Functions of the Executive. One of his contributions was the concept of the informal organization. Another significant contribution was the acceptance theory of authority, which states that people have free will and can choose whether to follow management orders. An order is accepted if the subordinate understands it, is able to comply with it, and views it as appropriate given the goals of the organization.

Max Weber (1864-1920)

 Max Weber, a German theorist, believed that an organization based on rational authority would be more efficient and adaptable to change because continuity is related to formal structure. He envisioned organizations that would be managed on an impersonal, rational basis. This form of organization was called a bureaucracy.  Some of elements of bureaucracy are:  

Weber's work on bureaucracy laid the foundation for contemporary organization theory.