Administrative Management Theory

• The first expert of Administrative Management Theory was Henri Fayol

• Fayol is called the "Father of Modern Management"

• Henri Fayol was a French industrialist and a management consultant

• Proposed
• Six primary functions of management

• Fourteen principles of management

Henri Fayol (1841-1925)

Principles of Management 1
 Fayol’s Principles of Management
Fayol divided the total industrial activities into six categories:

1. Technical (Production, Manufacturing)

2. Commercial (Buying, Selling, Exchange)

3. Financial (Search for and optimum use of capital)

4. Security (Protection of property and person)

5. Accounting (Balance sheets, Cost statistics)

6. Management (Planning, Organizing, Coordinating, commanding, Controlling)

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The 14 guiding principles by H. Fayol 

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 14 Principles of Henri Fayol
• Division of Labor

• Work of all kinds must be divided & subdivided and allotted to various
persons according to their expertise in a particular area.
• Authority & Responsibility

• Authority means the right to give command and receive obedience from
subordinates.
• Responsibility is when a person is accountable for the duties assigned to
him
 14 Principles of Henri Fayol Cont’d
• Unity of Command

• A sub-ordinate should receive orders and be accountable to one and only

one boss at a time.
• He should not receive instructions from more than one person
• Unity of Direction

• People engaged in the same kind of business or same kind of activities

must have the same objectives in a single plan.
• Without unity of direction, unity of action cannot be achieved.
 14 Principles of Henri Fayol Cont’d
• Equity

• Equity means combination of fairness, kindness & justice.

• The employees should be treated with kindness & equity if devotion is

expected of them.
• Order

• This principle is concerned with proper & systematic arrangement of

things and people.
• Arrangement of things is called material order and placement of people is
called social order.
 14 Principles of Henri Fayol Cont’d
• Discipline

• Discipline means sincerity, obedience, respect of authority & observance of

rules and regulations of the enterprise.
• Subordinate should respect their superiors and obey their order.
• Initiative

• Initiative means eagerness to initiate actions without being asked to do so.

• Management should provide opportunity to its employees to suggest ideas,

experiences & new method of work.
 14 Principles of Henri Fayol Cont’d
• Remuneration

• Remuneration to be paid to the workers should be fair, reasonable,

satisfactory & rewarding of the efforts.
• It should accord satisfaction to both employer and the employees.
• Stability of Tenure

• Employees should not be moved frequently from one job position to

another i.e. the period of service in a job should be fixed.
 14 Principles of Henri Fayol Cont’d
• Scalar Chain

• Scalar chain is the chain of superiors ranging from the ultimate authority to the lowest.

• Communications should follow this chain. However, if following the chain creates delays, cross-
communications can be allowed if agreed by all parties and superiors are kept informed.

• Sub-ordination of Individual Interest to common goal

• An organization is much bigger than the individual it constitutes, therefore interest of the
undertaking should prevail in all circumstances.
• The interests of any one employee or group of employees should not take precedence over the
interests of the organization as a whole.
 14 Principles of Henri Fayol Cont’d
• Espirit De’ Corps or TEAM SPIRITS

• It refers to team spirit i.e. harmony in the work groups and mutual understanding among
the members.
• Espirit De’ Corps inspires workers to work harder.

• Centralization

• Centralization refers to the degree to which subordinates are involved in decision making.
Whether decision making is centralized (to management) or decentralized (to
subordinates) is a question of proper proportion. The task is to find the optimum degree of
centralization for each situation.
Criticism against Administrative
Management Theory
• The administrative management theory is management oriented. It does not give much
attention to the problems of the workers

• Some of the concepts of administrative management theory were borrowed from military
science. For e.g. Henri Fayol gave importance to “commanding” and not “directing” the
workers

• The administrative management theory has a mechanical approach. It does not deal with
some of the important aspects of management such as motivation, communication and
leading
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 Neo-Classical
Management Theory

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Neo-Classical Management Theory

• Classical approach did not achieve complete production efficiency and workplace

harmony

• Managers still encountered difficulties and frustrations because people did not always

follow predicted or rational patterns of behavior

• Thus, there was increased interest in helping managers deal more effectively with the

‘people side’ of their organization

• The neo-classical theory reflects a modification over classical theories

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Neo-Classical Management Theory (Cont.)

• The neo-classical approach recognizes the importance of psychological and social

aspects of the workers as an individual and his relations within and among groups
and the organization

• It gained importance after the World War I, particularly in the wake of the
“Hawthorne experiments” at Western Electric Company by Elton Mayo during 1924
to 1932

• Elton Mayo is generally recognized as the father of the Human Relations Movement

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Hawthorne Experiment

• A famous series of studies of human behavior in work situations were conducted

at the Western Electric Company from 1924 to 1932

• In 1927 a group of researchers led by Elton Mayo, Fritz J. Roethlisberger and

Dickson at the Harvard Business School were invited to join at Western Electric’s
Hawthorne plant near Chicago

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Hawthorne Studies

• The Hawthorne experiment consists of four parts. These parts are

briefly described below:-
• Illumination Experiment.
• Relay Assembly Test Room Experiment.
• Interviewing Programme.
• Bank Wiring Test Room Experiment.

https://www.library.hbs.edu/hc/hawthorne/anewvision.html#e

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Hawthorne Experiment (Cont.)

Illumination Experiment

• The initial experiment carried out over a period of three years sought to
determine the effects of different levels of illumination on worker’s productivity

• The results of the experiments were ambiguous

• When the test group’s lighting conditions were improved, productivity tended to
increase just as expected

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Hawthorne Experiment (Cont.)
The Illumination Experiment

• But there was a tendency for productivity to continue to increase

when the lighting conditions were made worse also

• It was not able to maintain relationship between illumination and

productivity

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Hawthorne Experiment (Cont.)
Relay Assembly Test Room Experiment

• In the second set of experiments, a smaller group of six female telephone operators were put under
close observation and control

• Frequent changes were made in working conditions such as hours of work, lunch break, rest periods,
etc.

• Again the results were ambiguous

• Performance tended to increase even when the improvements in working conditions were withdrawn

• It was found that socio-psychological factors exercised a greater influence on productivity and
working conditions

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Hawthorne Experiment (Cont.)
Mass Interview Programme:
• A systematic study of the employees attitudes to reveal the meaning of “working
situation”.
• The researchers interviewed a large number of workers with regard to their
opinions on work, working conditions and supervision.
• Initially, a direct approach was used whereby interviews asked questions
considered important by managers and researchers.
• The researchers observed that the replies of the workmen were very careful.
• Therefore, this approach was replaced by an indirect technique, where the
interviewer simply listened to what the workmen had to say.
• The findings confirmed the importance of social factors at work in the total work
environment.
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Hawthorne Experiment (Cont.)
Bank Wiring Test Room Experiment:

• The fourth set of experiment attempted to understand how group norms affect group effort and
output

• It was noted that the informal organisation of workers controlled the norms established by the
groups in respect of each member’s output

• The researcher concluded that informal work groups have a great influence and productivity

Every group develops its own customs, habits and expectations for how things will be done. These patterns
and expectations, or group norms as they're sometimes called, influence the ways team members
communicate with each other. Norms can help or hinder a group in achieving its goals

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 Hawthorne Experiment (Cont.)
Bank Wiring Test Room Experiment:
• The Experiment Focused on social groups within a company and the causes which restrict output

• The experiment was conducted to study a group of 14 workers under conditions which were as close as possible to normal

• After the experiment, the production records of this group were compared with their earlier production records

• It was observed that the group evolved its own production norms for each individual worker, which was made lower than those set
by the management. Because of this, workers would produce only that much, thereby defeating the incentive system.

• Those workers who tried to produce more than the group norms were isolated, harassed or punished by the group.

• The findings of the study are:-

• Each individual was restricting output
• The group had its own “unofficial” standards of performance
• Individual output remained fairly constant over a period of time
• Informal groups play an important role in the working of an organization

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Hawthorne Experiment (Cont.)

• In the subsequent experiments, Mayo and his associates decided that financial
incentives, when these were offered, were not causing the productivity
improvements

• The researchers concluded that employees would work harder if they believed
management was concerned about their welfare, and supervisors paid special
attention to them

• This phenomenon was subsequently labelled as the Hawthorne Effect

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Human Relations Approach

• Focuses on the behavior of people in groups

• Focus on the effects of social relations, motivation and employee

satisfaction on factory productivity

• Workers are dealt in terms of their psychology and their fit with the
company

• Theories of Elton Mayo lays the foundation

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Theories of Elton Mayo

• The need for reciprocal communication, in which communication is

two way, from worker to chief executive, as well as vice versa

• The development of high quality leadership to communicate goals and

to ensure effective and coherent decision making

• The power of natural groups, in which social aspects take precedence

over functional organizational structures
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Criticism against Human Relations
Approach
• Lack of scientific validity

• Over-emphasised on groups

• Over-stretching on human relations

• Limited focus on work

• Over-stress on socio-psychological factors

• Negative view of conflict between organisational and individual goals

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Behavioural Movement

• It is a mature version of human relational movement

• Shows how managers should behave to motivate the employees and

encourage them to be committed to the achievement of the
organizational goals

• Understanding of human behavior at work improves productivity

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Elements of Neo-classical Theory

Individual

• Neo-classical theory recognised the individual differences which were ignored by the
classical theory

• Every individual has emotions feelings attitudes hopes aspirations and expectations

Work group

• An individual in a group develop social wants

• As he is a social being, he develops a desire to be accepted by his own group

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Elements of Neo-classical Theory (Cont.)
Participative management
• Participation in management for improving productivity
Orientation
• Classical - job oriented
• Neo classical - employee oriented
Motivation
• Motivated by social and psychological wants and not solely by economics incentives
Leadership
Employee Development

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