CHAPTER l

Classical Organization Theory

o 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
T aymiyyah 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 the next page), 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 modern audiences.
In the second ancient example (the first selection in this chapter, "Socrates Discovers Generic Management"), 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 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.

27

28

Classical Organization Theory

Exodus Chapter 18
13 And it came to pass on the morrow, that Moses sat to judge the people: and the people
stood by Moses from the morning unto the evening.
14 And when Moses' father-in-law saw all that he did to the people, he said, "What is this
thing that thou doest to the people? why sittest thou thyself alone, and all the people stand by
thee from morning unto even?"
15 And Moses said unto his father-in-law, "Because the people come unto me to inquire
of God:
16 When they have a matter, they come unto me; and I judge between one and another,
and I do make them know the statutes of God, and his laws."
17 And Moses' father-in-law said unto him, "The thing that thou doest is not good.
18 Thou wilt surely wear away, both thou, and this people that is with thee: for this thing is
too heavy for thee: thou art not able to perform it thyself alone.
19 Hearken now unto my voice, I will give thee counsel, and God shall be with thee: Be
thou for the people to God-ward, that thou mayest bring the causes unto God:
20 And thou shalt teach them ordinances and laws, and shalt shew them the way wherein
they must walk, and the work that they must do.
21 Moreover thou shalt provide out of all the people able men, such as fear God, men of
truth, hating covetousness; and place such over them, to be rulers of thousands, and rulers of
hundreds, rulers of fifties, and rulers of tens:
22 And let them judge the people at all seasons and it shall be, that every great matter they
shall bring unto thee, but every small matter they shall judge: so shall it be easier for thyself,
and they shall bear the burden with thee.
23 If thou shalt do this thing, and God command thee so, then thou shalt be able to endure,
and all this people shall also go to their place in peace."
24 So Moses hearkened to the voice of his father-in-law, and did all that he had said.
25 And Moses 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.
26 And they judged the people at all seasons: the hard cases they brought unto Moses, but
every small matter they judged themselves.
27 And Moses let his father-in-law depart; and he went his way into his own land.

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 been abandoned. They were only expanded
upon, refined, adapted, 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

29
even limit<td "rights" as organi!ational
Workers were
not a& individu;)ls but
as
parts in :Jn industrial
1n v;hich parts 1vcre rna<le of
only
when it
itnpractical to n1ake them of steel.
The aJve-nr of po\verdriven rn:n.:hinery and hence of the n1odern factory
spav;ned our currt-nt
of economic org(n1iztitions and organizt1rinn for producrion.
expensive. Prod1JC-tion \V0rkeni conkl not purchase flfld use
Po\vet-dtivcn equipment
th(;ir own equ1pn1ent as they h11d r.heir ov,,n toolH.
the phrose for being fired,
"get the sack," corncs frmn rhe
days vf the industrial revoludon
.a
1vorker lit,crully Vl"OS given a sack in. \vhich to gather up his tools. lncreasinglv, \vorkers \Vithouc their own tools and often \Virhout any s11ecial skilL1 had to gather for \Vntk \vhere the
equipment
factori..:s. Expensive cquip1nent h.ad to produce enough_ output t1)
jmtify it& acq1,iisition and n1ainrenance
'The factory systetn pr,,sented 1nanagcrs of o:gani:ation8 \Vi(h an
array
of new ptohlettlS.
had to arrange for heavy
of cs.p1tal. pLin ;H\d organproduction., coordinate and control activitks of large numbers
he for reliable
of pe'1ple and functions, contain costs (rhis \11-'as hardly n concern in '\;:ottag:e industry"
production), and 1nai11tati1 a trElincd and O)Otivatcd work force.
Under the factory system, orgf1niz;,1tional succc&>
froni
prothat kepr
bu&y and cosrs under control. Industrial and 1nechn1v
ducnon
ical
and their 1nachineb'---tvere d1e keys to production,
structures &1'd production systems \Vere needed to take
advantage of th(' m.nchines.
Organi;ation&, it V11:-rn thought,
work like nvic.hines, ltsir.g -people, capital, and 1nachincs as their parr'i. ]lltit as industrial engineers 501tght to design "the best" machines to
keep factories prodvctive, industrial and mech,111lcal
Lhi11king dominared d1eoties abont "the best way" to organize f'1r produ<'.tion. Thus, the first theories of
organization8 were concerned prin1ari\y with the anatomy, or structure, of formal organi-n1is
the (nilieu, or the environment, the 1node of thinking, that
and
influet1ced the tenets of classical organization theory.
Centralization of equipment and labor in factories, division of specialized labor,
management of speciC1lization, ai1d
on f.-icrorv equipn1ent al! \.Vere
cerns of the Scottish economiGt Adatn Stnith's \Vork, An Irn1uir11 into riv: Nature and Causes
of rhe \Vealth of Nauons (1776). The historian Arnold
(1956) identified Adam
S1nith (I
11nd Jarnes Watt (1
as the two i.ndividuals who 'Nere most
invented the
responsible for pushing the V.'orld intn industriahzation. W:i.tt, of
steam engine.
Smith, \Vho i> c<insidercd the father of the a(:<dernic discirlinc of econotnics, pro,
vided tl-te intellectual foundation for
capita\isn1. T/1e Weulth of Nations devote&
its first chapter, "Of lhe Division of Labour," to a Jiscussion of the optin1um organization
of a pin fucrory. Why'! Because specialtzatlon of JJ.bnr \V>J.S one of the pillars of Smith's "inr
visible hand" tnarket mechnni8rtl in which the greutest
W(>uld go to those v,ho v,'ete
the 1nost efficient in tho.: cornpetitlve marketplace. Tradition;;] pin makers could produce
only a {e;v dozen pins a day. \Xi'hen org:;i_nizcd in <1 fact.,ity \Vith each worker pcrfor111ing a
litnite.--l operation, rhey could produce tens of tl1ow;ut\Js a dfly. Sn1ith's "()f rhe Division of
Labour'' is reprinted here
coining as it did at the da\Vn of the in<llJstri::il revolution,
tt is tl1c
and i11fluential
on tht: \':t:<)n,irnic rationale of the factory
S)'$ten1. Smith rcvoluti0nize<l thinking ;i_hout econo111ics and 01i:;aruicitions. 111us tve have

30

Classical Organization Theory

operationally defined 1776, the year in which Wealth of Nations was published, as the
beginning 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
"delinquent" subordinates. McCallum, who is also credited with creating the first modem
organization 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 follow 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.
Although 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 in this chapter.
During the 1800s, two practicing managers in the United States independently discovered that generally applicable principles of administration could be determined
through systematic, scientific investigation-about thirty years before Frederick Winslow
Taylor's Principles of Scientific Management or Henri 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 "prescientific 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 prescientific 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
management and that the American Society of Mechanical Engineers (ASME) 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, ASME 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 scientific
management principles at Yale & Towne in 1904. Towne also nominated Taylor for the

Classical Organization Theory

31

presidency of ASME in 1906 and thus provided him with an international forum for
advocating scientific management. Upon election, Taylor promptly reorganized the ASME
according to scientific management principles.
While the ideas of Adam Smith, Frederick Winslow Taylor, and others are still
dominant influences on the design and management of organizations, it was Henri Fayal
(1841-1925), a French executive engineer, who developed the first comprehensive theory
of management. While Taylor was tinkering with the technology employed by the individual worker, Fayal 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
Starr's English translation, General and Industrial Management, was published 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.
Fayal believed that his concept of management was universally applicable to every
type of organization. Whereas he had six principles-technical (production of goods),
commercial (buying, selling, and exchange activities), financial (raising and using capital),
security (protection of property and people), accounting, and managerial (coordination,
control, organization, 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 individual 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 on the notion that there was "one best way" for accomplishing any given task, Taylor's scientific management sought to increase output by
using scientific methods to discover 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 organization-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

32

Classical Organization Theory

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 of the United States filed for increased
freight rates with the Interstate Commerce Commission. The railroads had been receiving
poor press-they were being blamed for (among many other things) a cost-price squeeze
that was bankrupting farmers-and the rate hearings received extensive media coverage.
Louis D. Brandeis, a self-styled populist lawyer who would later be a distinguished 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 management" methods (Urwick, 1956). At first,
Taylor was relrn;:tant 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 other accounts on the subject. Reprinted here is an
article, also entitled "The Principles of Scientific Management," which was the summary
of an address Taylor gave on March 3, 1915, two weeks before his death.
Several of Taylor's associates subsequently built reputations for innovations that utilized principles of scientific management, including Frank Gilbreth (1868-1924) and
Lillian Gilbreth (1878-1972), leaders in developing the tools and techniques of "time and
motion study" including the "therblig" (Spriegel & Myers, 1953 ); Henry Laurence Gantt
(1861-1919), who invented the Gantt chart for planning work output (Alford, 1932); and
Carl 0. Barth (1860-1939) who, among his other accomplishments, in l908 convinced
the dean of the new Harvard B4siness School to adopt Taylorism as the "foundation concept" of modern management (Urwick, 1956). Frank and Lillian Gilbreth also achieved
wide public recognition for the book (1948) and movie, Cheaper by the Dozen, which
described the couple's efforts to raise their twelve children using scientific management
principles and practices.
In contrast with the fervent advocates of scientific management, Max Weber
( 1864-1920) was a brilliant analytical sociologist who happened to study bureaucratic
organizations. It is hardly worth mentioning that 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. Bureaucracy refers 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

33

->ir<gle f\H\'.i1- iflfh1enHaJ

and thv point of Jepartur<c for al! (urlh.or analyses (Uthe
$Ubject (inc\uJ\ng those of t11e "tnr!dettl'
in
4 ).
Dra\ving upon
of anclent bureaucracies in Egypr, Rome, c:hina, and the
Byzunth1e Etnpire.
\vell as on the rnore modern ones en1crginr:: in Eur<Jpe during the
ni11en:enth and early part of the twentit>th centuries, Weber \1$ed an "ideal-type" approach
to cxtrapola.te frorn the real w11rld the central core of fearures characterisuc of the 1nost fully

developt:d bureaucratic forrn of org@niration. Wt.'htl''s "Burenucrncy," which is included

here, is nkithcr a dcscr1ptiort of reality nor a sratentent of nurrnudve preference. In fact,
Wcbt't feared the pt)tenrial implications of burtaucracies. Rather, his 1deal-rype bureau(:n,icy is tnerr.ly
idenr.illcati,--in of the tn.1jo1
lr ferttures thr.t cl1aracterire thb
type of socJal institution.
Lur11er Gu lie k's "Notes on the Theory of Organization," \vhich was influenced heavily by th<'.' w<:irk (lf T-Icnri F;1y0l, 1ne 0f the hest-kn1J\Vll
of rhe ','principles" ap
pt!Jach tu f!'.U)flil.ging rhe funcrions of organizatiuru. It appt<lred in Papers on the Sci.?nce uf
Administration, a collection that Gulick and Lyndal\ Ur\vick
in 1937. Here Gulick
introduced his fan1ous 1nnen10nic, POSDCORB, \vhii.:h $tood for r.he seven major func,
tlons of executive
crganizing,
dircting, coordinntint!.
reporting, (Ind budgeting: (}ulick's principles of
included unity of co111tc1rn1d Hn<l sr;1n of control. ()vera!l, Papers on tho:; Selene,;. of AdrniniJ!ratio-n
a
of the "state of the Btt" of orgnnit'1xion theory. TI1e
l'f
through
of 111an11gc1ni.:nt functioris conti(lues within the field of organization theory.
Dank:! A, Wren (1972) observed that "the devclopincnt of a body of kno\vledge
about ho,,v to 1nunage hus .. , evoived vvirhin a fratnev.'ork of the econon1ic, social, and political fcets of various cultures. 1'.-1<tnagemcnt thought is both a process in and a product 0f
its eulturvdl envirornnent." The sclecnons we have
to rcptcscnt the
of otgan1zation theory vividly dcn,nnst't<'l.re
dtesis. Lo<>king thruugl1 today's len:>es,
it is tempting to deni.,crrate the corirributions of rhe classicalists- to view them as narrow
and sin1pli\tlc. In dt0 context of their times, ho\\/ever, they were briiliant pioneers. TI)eir
thinktng ptovidcJ invaluable
for rhe held of org::tniz:uion tl1eory, and tl1eir
influence npon organization the0r)' and
continues today.

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