AdministrativeManagement

Theories

Introduction
WehavechosentodiscussAdministrativeManagementTheory
becauseitplaysavitalroleinthedevelopmentofeverybusiness
andorganization.
Asperthebook,AdministrativeManagementisthestudyofhowto
createanorganizationalstructureandcontrolsystemthatleadsto
highefficiencyandeffectivenessbasedonMaxWebbersTheoryof
BureaucracyandFayolsPrinciplesofManagement

TheTheoryofBureaucracy

DevelopedbyMaxWeber(18641920),aGermanprofessorofsociology.

Principle1:

Inabureaucracy,amanagersformalauthorityderivesfromthepositionheorsheholdsinthe
organization.

Authoritythepowertoholdpeopleaccountablefortheiractionsandtomakedecisionsinreferenceto
theuseoforganizationalresources.(Textbook/ContemporaryManagement6thEdition)

Intodaysbusinessmodels,thistypeoftheoryisnotverycommon.Nowadays,weseemoreofan
informalauthorityapproachinwhichthereispersonalexpertise,technicalknowledge,moralworth,andthe
abilitytoleadandtogeneratecommitmentfromsubordinates,withouttheuseofthisabsolutepowerfrom
oneindividual.

TheTheoryofBureaucracy

DevelopedbyMaxWeber(18641920),aGermanprofessorofsociology.

Principle2:

Inabureaucracy,peopleshouldoccupypositionsbecauseoftheirperformance,notbecauseoftheir
socialstanding.

Someorganizationsandindustriesarestillaffectedbysocialnetworksinwhichpersonalcontactsand
relations,notjobrelatedskills,influencehiringandpromotionaldecisions.(Textbook/Contemporary
Management6thEdition)

Theoldways,ofnotwhatyouknow,butwhoyouknow,arestillaroundintodayssociety,butitcanonly
getyousofar.Intodaysbusinessworld,whatyouknowandeducationalknowledge,playaveryimportant
partinmovingupthecorporatelatterandbeingabletomaintainamanagerialpositionrequiresthe
utilizationofstayingcurrentonuptodatetechniquesandinformation.

TheTheoryofBureaucracy

DevelopedbyMaxWeber(18641920),aGermanprofessorofsociology.

Principle3:

Theextentofeachpositionsformalauthorityandtaskresponsibilities,anditsrelationshiptoother
positionsintheorganizationshouldbeclearlyspecified.

Whenthetaskandauthorityassociatedwithvariouspositionsintheorganizationareclearly
specified,managersandworkersknowwhatisexpectedofthemandwhattoexpectfromeachother.
(Textbook/ContemporaryManagement6thEdition)

Mostorganizationsshouldandareclearlydefiningtaskandpositionresponsibilities.Job
descriptionsshouldincludeallfacetsofanemployeeheldposition.Clarificationofonesjob
expectationsisessentialforallfivebusinessfunctionsinordertomanageandmaintainahighlevel,
andmeasurablelevelofsuccessforallorganizations.

The Theory of Bureaucracy

Developed by Max Weber (1864-1920), a German professor of sociology.

Principle 4:

Authority can be exercised effectively in an organization when positions are arranged hierarchically, so
employees know whom to report to and who reports to them.

Managers must create an organizational hierarchy of authority that makes it clear who reports to whom
and to whom managers and workers should go if conflicts or problems arise. (Textbook / Contemporary
Management - 6th Edition)

Todays business models utilize the initiative factor in which employees are given the ability to act on their
own, without direction from a superior. This empowerment of employees relieves the stress of constant
supervision and allows supervisors and managers to concentrate more on other administrative duties. The
balance between a vertical and horizontal organizational structure is more widely used in todays business
models.

The Theory of Bureaucracy

Developed by Max Weber (1864-1920), a German professor of sociology.

Principle 5:

Managers must create a well defined system of rules, standard operating procedures, and norms so that they can
effectively control behavior within an organization.

Standard Operating Procedures (SOPs) are specific sets of written instructions about how to perform a certain
aspect of a task. (Textbook / Contemporary Management - 6th Edition)

Most companies have SOPs and require employees to learn and follow them. We have seen how in addition to
following rules and regulations, many organizations have allowed for creativity and innovation to supersede the
common way of conducting business where it was once said, rules are rules and they could never be broken.
Guidelines are needed and common sense is always important, but have an open line of communication to new
ideas and thoughts is essential in todays business society.

Henri Fayols 14 Principles of Management

Division of Labor
Job Specialization and well divided labor should increase efficiency.
Possible downside: Boredom that could drop quality, worker initiative,
and flexibility.
How Does this Apply Today?
This is a potentially good practice for institutions whose workers deal
with highly technical or repetitive tasks. Tasks that require
innovation and a creative exchange or with workers who are required
to have cross-departmental knowledge may not benefit from Division
of Labor.

Henri Fayols 14 Principles of Management

Authority and Responsibility
Managers have the right to give orders and demand obedience
(formal).
Managers gain authority derived from expertise, technical
knowledge, moral worth, and ability to lead and generate
commitments from subordinates (informal).
How Does this Apply Today?
Formal authority can be used or perceived as totalitarian shutting
down the much needed two way communication; however, much
can be gained by supervisors whose subordinates naturally follow
those who they perceive as a leader (characterized by informal
authority).

Henri Fayols 14 Principles of Management

Unity of Command
An employee should receive orders from only one superior.
How Does this Apply Today?
Leads to less opportunities for confusing or conflicting directives.
Very appropriate as long as subordinate managers are able to
interpret directions from their leaders and disseminate the
directions to their subordinates.

Henri Fayols 14 Principles of Management

Line of Authority
Clearly defined and limited chain of command from the top to
the bottom levels.
Allows for cross departmental interaction of middle managers to
speed decision making.
How Does this Apply Today?
In a competitive market place, limiting the line of authority
maintains overhead to its minimum and allows for quicker
reaction to directives in a marketplace requiring speed.

Henri Fayols 14 Principles of Management

Centralization
Authority should not be concentrated at the top of the chain of
command because it slows down decision making.
Centralization at the top may be necessary when it is vital that
the organizations strategy be firmly adhere to.
How Does this Apply Today?
When authority is concentrated at the top of the organizations
chain of command, only those at the top can make decisions.
This funnels the workload through a small number of managers
causing delays. Also, centralization at the top trains middle
managers to quickly pass on the problems and they simply
follow orders. In cases where an organization needs to operate
in a crisis mode, it may be vital to assure that all but the most
trivial decisions be made at the top.

Henri Fayols 14 Principles of Management

Unity of Direction
An organization should have a single plan of action to guide
managers and workers.
How Does this Apply Today?
An organization that does not have a single purpose and plan
becomes inefficient and unfocused. If managers and workers
have a different focus or direction, not all of the organizations
resources are used towards the legitimate goal.

Henri Fayols 14 Principles of Management

Equity
All members of an organization are entitled to be treated
with justice and respect.
How Does this Apply Today?
Equity in an organization gains its members loyalty and
trust. They can proceed and dedicate all of their time to
the task at hand knowing that they will be treated fairly
and equally.

Henri Fayols 14 Principles of Management

Order
The arrangement of organizational positions should
maximize organizational efficiency.
- Fayol recommended the use of organizational charts
to show the position and duties of each employee and to
indicate which positions an employee might move to or be
promoted into the future. This form of guidance or career
planning, allows for an orderly advancement from one
position to the next.

Henri Fayols 14 Principles of Management

Henri Fayols 14 Principles of Management

Initiative
Managers should allow employees to be innovative and creative.
- Fayol believed that managers needed to encourage their
employees to act on their own, without direct supervision from a
supervisor. This key to this principle is to promote creativity and
innovation. Hence, employees with more freedom and responsibility,
tend to have a greater desire to accomplish the job at hand.
Example:
Many retailers have empowered their cashiers to perform price overrides without the need for a supervisor to approve the change.
More and more companies are empowering their call center agents
to perform one-time fee reversals without the approval of a
supervisor.

Henri Fayols 14 Principles of Management

Discipline
Managers need to create a workforce that strive to achieve organizational
goals.
- Fayol believed that discipline resulted from respectful relations
between organizational member and reflects the quality of an
organizations leadership and a managers ability to act fairly and
equitably.
Example:
A manager may ask an employee to stay late or work weekends in order
to complete an assignment. If the manager has always been courteous
and respectful of the employee, then they may be more willing to oblige
to the managers request.

Henri Fayols 14 Principles of Management

Renumeration of Personnel
System that managers use to reward employees should be equitable for
both employees and the organization.
- Fayol was a big proponent of bonuses and profit sharing plans,
because he believed it encouraged productivity. However, he was cautious
to state the reward system could not be the subject of abuse or bias.
Many companies perform six month or twelve month reviews of their
employees and based on their performance figures theyre rewarded with
a bonus. Typically the amount of the bonus is a percentage of their
annual salary.
Example:
Company A pays up to twenty percent of an employees salary.
Employee X annual salary is $75K. In other words, employee X can
make as much as $15K in annual bonus.

Henri Fayols 14 Principles of Management

Stability of Tenure of Personnel
Recognition that long-term employees develop skills that can improve
organizational efficiency.
-Fayol believed that when employees stayed with an organization for
extended periods of time, they develop skills that improve the
organizations ability to utilize its resources.
Example:
Consider employees that grow within a company. Companies are often
more willing to hire and promote from within because employees may
already possess certain job function skills and technical knowledge of the
applications, which usually leads to a lower cost of training. Furthermore,
since the employee has already been exposed to the environment, he/she
may be more well equipped to come up with the right approaches to
handle certain situations.

Henri Fayols 14 Principles of Management

Subordination of Individual Interests to the Common Interest
Employees should understand how their performance affects the
performance of the whole organization.
- No one individual or group is above the organization. Having said
that, remember Fayol believed that there needed to exist a harmonious
relationship between the organization and its members, in order to ensure
that employees were being treated fairly and rewarded for their
performance.
Example:
Sports teams, like any other business, consist of upper management
executives (CEO, President, GM), managers (coaches) and players
(employees). Keep in mind though that in this business, some players
tend to make more money than some of those positions above them.
Players that are selfish, unwilling to adapt and change to the philosophy
set forth by the teams management may find themselves being released
or traded.

Henri Fayols 14 Principles of Management

Esprit de Corps
Managers should encourage the development of shared feelings of
comradeship, enthusiasm, or devotion to a common cause.
- Comes about by encouraging communication between managers
and workers to solve problems and implement solutions.
Example:
A compliance officer notices that communication between the
compliance department and the business unit is lacking cohesiveness. The
employee, knowing that their boss is willing to listen to their opinions,
can suggest that a liaison, someone with experience in both areas of the
business, be hired to facilitate communication and ultimately satisfy the
needs of both departments.

Conclusion

All in all, administrative management theory such

as; bureaucracy is a formal organizational system
that is applied in todays business industry
throughout the world. The management process of
Fayols fourteen principles of management has
influenced efficiency in todays business society.

References
Jones, G.R., George, J.M (2009). The Evolution of Management Thought. Contemorary
Management (pp 38-71). New York, NY: McGraw-Hill/Irwin.