No single date can be pinpointed as the beginning of serious thinking about how organizations 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 commerce. A lot

can be learned from the early organizations of the Muslims, Hebrews, Greeks, and Romans.

If 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 Taymiyyah 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 earlier 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 Box 1), 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 accepts 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 modem audiences.

In the second ancient example (see the first selection in this chapter), 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 direction of a chorus, a family, a city, or

an army” (Xenophon, 1869). Socrates lists and discusses 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 alike — 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 always 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,
consequently, of the field of organization theory. Classical organization theory,
as its name implies, 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 organization theory is essential not only because of its historical

interest but also, more importantly, because subsequent analyses and theories presume a knowledge of
it. The classical school dominated organization theory into the 1930s and remains highly

influential today (Merkle, 1980). Over the years, classical organization theory expanded and

matured. Its basic tenets and assumptions, however, which were rooted in the industrial revolution of
the 1700s and the professions of mechanical engineering, industrial engineering,

and economics, have never changed. They were only expanded upon, refined, and made

more sophisticated. These fundamental tenets are:

1. Organizations exist to 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 management theorists about
how organizations worked or should work were a direct reflection of

the societal values of their times— and the times were harsh. It was well into the twentieth

century before the industrial workers of the United States and Europe began to enjoy even limited
“rights” as organizational citizens. Workers were viewed not as individuals but as

interchangeable parts in an industrial machine in which parts were made of flesh only

when it was impractical to make them of steel.

The advent of power-driven machinery and hence the modem factory system spawned

our current concepts of economic organizations and organization for production. Power-

driven equipment was expensive. Production workers could not purchase and use their own

equipment as they had their own tools. Remember the phrase for being fired, “get the sack,”

comes from the earliest days of the industrial revolution when a dismissed worker literally

was given a sack in which to gather up his tools. Increasingly, workers without their own

tools and often without any special skills had to gather for work where the equipment was —

in factories. Expensive equipment had to produce enough output to justify its acquisition

and maintenance costs.

The advent of the factory system presented managers of organizations with an un-

precedented array of new problems. Managers had to arrange for heavy infusions of capi-

tal, plan and organize for reliable large-scale production, coordinate and control activities

of large numbers of people and functions, contain costs (this was hardly a concern in “cot-

tage industry” production), and maintain a trained and motivated work force.

Under the factory system, organizational success resulted from well-organized produc-

tion systems that kept machines busy and costs under control. Industrial and mechanical

engineers— and their machines— were the keys to production. Organizational structures

and production systems were needed to take best advantage of the machines. Organizations,

it was thought, should work like machines, using people, capital, and machines as their

parts, just as industrial engineers sought to design “the best” machines to keep factories pro-

ductive, industrial and mechanical engineering-type thinking dominated theories about

“the best way” to organize for production. Thus, the first theories of organizations were

concerned primarily with the anatomy, or structure, of formal organizations. This was the

milieu, or the environment, the mode of thinking, that shaped and influenced the tenets

of classical organization theory.

Centralization of equipment and labor in factories, division of specialized labor, man-

agement of specialization, and economic paybacks on factory equipment all were con-

cerns of the Scottish economist Adam Smith’s work An Inquiry into the Nature and Causes

of the Wealth of Nations (1776). The historian Arnold Toynbee (1956) identified Adam

Smith (1723-1790) and James Watt (1736-1819) as the two people who were most re-

sponsible for pushing the world into industrialization. Watt, of course, invented the steam

engine.

Smith, who is considered the father of the academic discipline of economics, provided

the intellectual foundation for laissez-faire capitalism. The Wealth of Nations devotes its first

chapter, “O f the Division of Labour,” to a discussion of the optimum organization of a pin

factory. Why? Because specialization of labor was one of the pillars of Smith’s “invisible

hand” market mechanism in which the greatest rewards would go to those who were the

most efficient in the competitive marketplace. Traditional pin makers could produce only
a few dozen pins a day. When organized in a factory with each worker performing a limited

operation, they could produce tens of thousands a day. Smith’s “O f the Division of Labour”

is reprinted here because, coming as it did at the dawn of the industrial revolution, it is the

most famous and influential statement on the economic rationale of the factory sys-

tem. Smith revolutionized thinking about economics and organizations. Thus we have operationally
defined 1776, the year in which Wealth of Nations was published, as the be-

ginning 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 York 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 “delin-

quent” subordinates. McCallum, who is also credited with creating the first modem organi-

zation 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. A l-

though 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 York and Erie Railroad. Excerpts from his “Superintendent’s Report” of March 25,

1856, are reprinted here.

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 Taylor’s Principles of Sci-

entific Management or Fayol’s General and Industrial Management. The first, Captain Henry

Metcalfe (1847—1917) of the United States Army’s Frankford 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 of Workshops, Public and Private (1885),

which also pioneered in the application of “pre-scientific management” 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

important historically, it is so similar to that of Taylor and others that it is not included

here as a selection.

The second pre-scientific management advocate of the 1880s was Henry R. Towne

(1844—1924), cofounder and president of the Yale & Towne Manufacturing Company. In

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

agement and that the American Society of Mechanical Engineers (ASM E) should take a

leadership role in establishing a multicompany, engineering/management “database” on

shop practices or “the management of works.” The information could then be shared among

established and new enterprises. Several years later, ASM E adopted his proposal. The paper

he presented to the society, “The Engineer as Economist,” was published in Transactions of

the American Society of 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 sci-

entific management principles at Yale & Towne in 1904. Towne also nominated Taylor for the presidency
of ASM E in 1906 and thus provided him with an international forum for

advocating scientific management. (Upon election, Taylor promptly reorganized the ASM E

according to scientific management principles.)

While the ideas of Adam Smith, Frederick Winslow Taylor, and others are still dom-

inant influences on the design and management of organizations, it was Henri Fayol ( 1841—

1925), a French executive engineer, who developed the first comprehensive theory of man-

agement. While Taylor was tinkering with the technology employed by the individual
worker, Fayol was theorizing about all of the elements necessary to organize and manage a

major corporation. Fayol’s major work, Administration Industrielle et Generale (published in

France in 1916), was almost ignored in the United States until Constance Storr’s English

translation, General and Industrial Management, appeared 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.

Fayol believed that his concept of management was universally applicable to every type

of organization. Whereas he had six principles — technical (production of goods), commer-

cial (buying, selling, and exchange activities), financial (raising and using capital), security

(protection of property and people), accounting, and managerial (coordination, control, or-

ganization, planning, and command of people)— Fayol’s primary interest and emphasis was

on his final principle, managerial. It addressed such variables as division of work, authority

and responsibility, discipline, unity of command, unity of direction, subordination of indi-

vidual interest to general interest, remuneration of personnel, centralization, 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 management,

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 upon the notion that there was “one best way” of accomplishing any

given task, Taylor’s scientific management sought to increase output by discovering the

fastest, most efficient, and least fatiguing production methods.

The job of the scientific manager, once the “one best way” was found, was to impose this
procedure on his or her organization. Classical organization theory derives from a corollary

of this proposition. If there 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 organi-

zation— 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

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 filed for increased freight rates with

the Interstate Commerce Commission. The railroads had been receiving poor press, being

blamed for (among many other things) a cost-price squeeze that was bankrupting farmers,

so the rate hearings received extensive media coverage. Louis D. Brandeis, a self-styled pop-

ulist lawyer who would later be a 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 manage-

ment” methods (Urwick, 1956). At first, Taylor was reluctant to use the phrase because it

sounded too academic. But the ICC hearings 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 of Scientific Management, but
he also wrote numerous accounts on the subject. Reprinted here is an article,

also entitled “The Principles of Scientific Management,” which was the summary of an ad-

dress given by him on March 3, 1915, two weeks prior to his death.
Several of Taylor’s associates subsequently gained wide recognition, including, for ex-

ample, Frank (1868-1924) and Lillian (1878-1972) Gilbreth of Cheaper by the Dozen

(1948) and “therblig” (Spriegel & Myers, 1953) fame; Henry Laurence Gantt (1861-1919),

who invented the Gantt chart for planning work output (Alford, 1932); and Carl O. Barth

(1860-1939), who among his other accomplishments, in 1908 convinced the dean of the

new Harvard Business School to adopt Taylorism as the “foundation concept” of modern

management (Urwick, 1956).

In contrast with the fervent advocates of scientific management, Max Weber (1864 —

1920) was a brilliant analytical sociologist who happened to study bureaucratic organizations.
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. Typically, bureaucracy is

used to refer to a specific set of structural arrangements. It is also used to refer to specific

patterns of behavior— patterns that are not restricted to formal bureaucracies. It 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 single most influential statement

and the point of departure for all further analyses on the subject (including those of the

“modem” structuralists in Chapter IV).

Drawing upon studies of ancient bureaucracies in Egypt, Rome, China, and the Byzantine Empire, as well
as on the more modern ones emerging in Europe during the nineteenth

and early part of the twentieth centuries, Weber used an “ideal-type” approach to extrapolate from the
real world the central core of features characteristic of the most fully developed bureaucratic form of
organization. Weber’s “Bureaucracy,” which is included here, is neither a description of reality nor a
statement of normative preference. In fact, Weber

feared the potential implications of bureaucracies. Rather, his ideal-type bureaucracy is

merely an identification of the major variables or features that characterize this type of social institution.

Luther Gulick’s “Notes on the Theory of Organization,” which was influenced heavily by the work of
Henri Fayol, is one of the major statements of the “principles” approach
to managing the functions of organizations. It appeared in Papers on the Science of Administration, a
collection that Gulick and Lyndall Urwick edited in 1937. Here Gulick introduced his famous mnemonic,
POSDCORB, which stood for the seven major functions of

executive management— planning, organizing, staffing, directing, coordinating, reporting,

and budgeting. Gulick’s principles of administration also included unity of command and

span of control. Overall, Papers was a statement of the “state of the art” of organization theory. The
study of organizations through analysis of management functions continues within

the field of organization theory.

Daniel A. Wren (1972) once observed that “the development of a body of knowledge

about how to manage has . . . evolved within a framework of the economic, social, and political facets of
various cultures. Management thought is both a process in and a product of

its cultural environment.” The selections we have chosen to represent the classical school

of organization theory vividly demonstrate Wren’s thesis. Looking through today’s lenses,

it is tempting to denigrate the contributions of the classicalists — to view them as narrow

and simplistic. In the context of their times, however, they were brilliant pioneers. Their

thinking provided invaluable foundations for the field of organization theory, and their

influence upon organization theory and theorists continues today.