4 Classical Business Practices That Are Still Evident in Today’s Business

The classical management approach to control is still evident in management and accounting thinking today. Administrative managerial tactics and bureaucratic theory are branches of classical management and this essay focuses on how these theories are still used in contemporary business practices. Control is defined as “the power to influence or direct people’s behaviour” (Oxford Dictionaries, 2011) and is the driving force for which the administrative principles were procured.

There are fourteen administrative principles that were derived from the work and writings of Henri Fayol, this essay will focus on division of labour, scalar chain and esprit de corps principles. I will also be talking about the bureaucratic principle of management being separate from ownership. To give a greater insight into the use of the administrative and bureaucratic business practices, I will be referring to Navman, Deloitte and Fletcher Construction, as these existing companies are good examples of how these management theories are still in use today.

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Henri Fayol was one of the founders of Administrative theory and advocated a universalistic approach to management. That is, that Fayol prescribed a rigid and inflexible set of principles designed to suit all organizations, in all circumstances, at all times (Parker ; Ritson, 2005). One of his fourteen administrative principles and one that is still evident in today’s management systems is the idea of division of labour amongst the work place.

This principle proposes that work can be performed more efficiently and more productively if it is divided into smaller elements and assigning specific elements to specific workers (Rodrigues, 2001). One of the thoughts behind this was that workers could specialise more into their working element, therefore perform their job more efficiently. Although, some present day managers have found that greater efficiency and productivity can be attained by their employees performing multiple functions (generalisation), there are still traces of the division of labour principle throughout most production organisations.

Fletcher Construction undertakes civil engineering projects all around New Zealand (Smith, 2009) and is a good example of how a business is separated into specific divisions to run more efficiently. Fletcher Construction is divided into eight separate divisions: Building, Engineering, Interiors, South Pacific, Brian Perry Civil, Piletech, PipeWorks and Seovic (Fletcher Construction, 2011). Each division is responsible for a specific section of the business, this means specialisation can occur and the over all business will function better as a whole.

This also ties into Fayol’s principle of unity of direction, where similar activities in an organisation should be grouped together under one manager. (Samson ; Daft, 2009). Fletcher Construction gains greater efficiency by this separation, as each worker will have specific skills and knowledge that relate to their division. Another one of Henri Fayol’s fourteen administrative principles is the scalar chain principle, which states how an uninterrupted chain of authority should extend from the highest level to the lowest position in the organisation (Rodrigues, 2001).

It provides a certain level of initiative at all levels of authority and aims to facilitate formal organisational controls. Fayol noted that it was important that each person in authority at every hierarchical level must always be familiar with what is going on in all areas under him (Daniel ; Bedeian ; Breeze, 2002). This is very important, as the business will lose efficiency if knowledge of a business’s engagement is lost. A good example of where the scalar chain is still present in the modern business structure is at Deloitte.

Deloitte is a multinational professional services firm (Deloitte, 2011). Fayol’s scalar chain principle can be seen in Deloitte’s ranking system, which depends on a workers level of knowledge and experience. The levels include interns and graduates, up to managers and partners. This improves efficiency in most cases, as you have less experienced workers being trained and overseen by more knowledgeable superiors. But in some cases it can also discourage over-performers, since the ranking system is based on a workers loyalty and time spent at a firm, rather than their skills and work ethic.

This may mean that workers who can pick up more work and do the work more efficiently than others may not be rewarded with higher ranks. Deloitte supports a hierarchy where the manager’s of each service line oversees the sectors engagements and clients. This is so the more experienced managers can see whether a job is being achieved correctly and efficiently. Another one of Henri Fayol’s administrative principles was the principle of esprit de corps, which stated that the maintenance of high morale and unity among employees is imperative (Rodrigues, 2001).

Fayol believed that conferences bringing the heads of separate departments together at regular intervals, orchestrated the progress of the whole operation. One hour in conference per week can well avoid misunderstandings and particularly facilitate harmony amongst all. A good example of a business that values it’s team moral highly is Navman. Navman is a name synonymous with GPS navigation across the globe and continues to pioneer new navigation technology (Navman, 2011). Once a month the entire Navman team would get together in the staff canteen for a rundown on company activities and goals.

In recent times it has to happen once a quarter and the company has to hire North Harbour football stadium to fit everyone in (Jayne, 2005). This builds team moral as employees feel as though they are a team working towards the same goal of efficiency. When a business is expanding rapidly it can be very hard for management to keep track of their workers and their proceedings, as a result efficiency will drop. Fayol’s esprit de corps principle is still seen in the today’s business practices, but with companies always expanding, some have lost the efficiency and team moral that they may have had previously.

Fayol was known as saying “Let us not forget, in passing, that personal satisfaction and self-respect are often stronger than self-interest when it comes to stimulating individual initiative” (Daniel ; Bedeian ; Breeze, 2002, p. 906). Fayol’s esprit de corps principle is still evident in almost all successful businesses in modern times and I believe that it is one of the most important of his fourteen principles. Max Weber is one of the most important social scientists of the last century and was the main founder of bureaucratic theory (Peukert, 2004).

For Weber, the bureaucracy was both the paradigm of the rationlisation process as well as the “housing” within which much that rationalisation took place (Greisman ; Ritzer, 1981). One of the main bureaucratic theories that arose from Weber’s work was the idea of management being separate from ownership. Weber believed that an organisation based on rational authority would be more efficient and adaptable to change because continuity of a business is related to formal structure and positions rather that to a particular person, who may leave or die (Samson ; Daft, 2009).

The business structure is known more commonly now as a business having unlimited liability. This means that a business (managers included) is seen as separate and distinct from its owners. This is common in contemporary businesses, as it is a safeguard against management and owners having a conflict of interest. We only have to look at the companies on the stock exchange to see that Weber’s separation of management and ownership is still evident in today’s management. Percentage ownerships of businesses are being sold all the time and management is not allowed to own over a specific proportion of their business.

This is due to large companies controlling millions of dollars of investor’s money, so there has to be a distinct gap between the ownership and control of business to ensure a conflict of interest does not occur. In this essay I have showed that of Henri Fayol’s administrative principles, division of labour, scalar chain and esprit de corps are still used in contemporary businesses. Although these principles where theorised in the early twentieth century, they are still useful for the efficiency and success of twenty first century businesses.

Max Weber’s bureaucratic theory of management being separate from ownership is still important in today’s practices. Businesses have become more complex with time and with the greater complexity there is greater ability to exploit it. Although many organisations have turned away from bureaucratic theory, we still see regular business examples of the fundamental principles. Word Count: 1,379 Daniel, W ; Bedeian G. ; Breeze J. (2002). The foundations of Henri Fayol’s administrative theory. Management Decision, 40(9), 906-918.

Retrieved April 2, 2011, from Business Source Premiert database. Deloitte. (2011). About Deloitte. Retrieved April 2, 2011, from http://www. deloitte. com/view/en_GX/global/about/index. htm Fletcher Construction. (2011). Business Units. Retrieved April 2, 2011 from http://www. fletcherconstruction. co. nz/ Greisman, H ; Ritzer, G. (1981). Max Weber, Critical Theory, and the Administered World, Qualitative Sociology. 4(1), 34,22. Retrieved March 31, 2011, from Business Source Premier database. Jayne, V. (2005).

COMPANY PROFILE ? Positioning for Growth – How Navman steers its business NZ Management magazine. Navman. (2011). About Navman. Retrieved April 2, 2011, from http://www. navman. com/in-car/europe/uk/About-Navman/ Oxford Dictionaries. (2011). Control. Retrieved April 2, 2011, from http://oxforddictionaries. com/view/entry/m_en_gb0176220#m_en_gb0176220 Parker, l ; Ritson, P. (2005). Fads, stereotypes and management gurus. Management Decision, 43(10), 23. Retrieved April 1, 2011, from Business Source Premier database.

Peukert, H. (2004). Max Weber. American Journal of Economics ; Sociology. 63(5), 987-1020. Retrieved March 31, 2011, from Business Source Premier database. Rodrigues, C. (2001). Fayol’s 14 principles of management then and now:a framework for managing today’s organizations effectively. Management Samson, D. ; Daft, R. L. (2009) Management. (3rd ed. ) South Melbourne: Cengage Learning Australia. Smith, J. (2009). No job to big: a history of Fletcher Construction (1) . Wellington: Steele Roberts Publishers.

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