Classical Management Theories

The Bureaucratic Management is still used in the USA by service-based organizations such as libraries. One concrete example where Fayols Bureaucratic Management ideas are still in use is at the Wichita State University Libraries. Bureaucracy is also still being used in the US Postal Service.

In Mauritius, mass production lines and piece rate systems are used in the garment and manufacturing industries. Another industry where the Classical Management Theories are still in use is in the sea-food hub, more specifically at the Mauritius Tuna Processing Plant.

Mauritius and its economy are at a pivotal point. The pace of change is exhilarating. That is why in his budget speech 2008-2009, Hon. Rama Sithanen, Minister of Finance pointed out the urgency for our economy to shift from the traditional pillars to a service-oriented economy and to a knowledge-based society. For instance, he advocated that the ICT sector must add to the pillars of the Mauritian economy. Business leaders expect ICT to have a greater impact on their business. The industries experiencing the greatest change are the technology, telecommunications and financial services. The Minister also stressed on the development of the SMEs as he formulated that in terms of job creation, new jobs will come mostly from small businesses and medium-sized companies.

But since the formulation of the Classical Management Theories in the 18th century, the economic landscape has changed. Businesses do not exist in a vacuum. They are in fact open systems with constant and dynamic interaction with the environment. Today’s business environment is global and highly competitive. Managers are becoming increasingly aware of the effects of the business environment

There are two aspects of the business environment, namely the internal and the external environment. The internal environment relates to those factors that the organisation can relatively control. These are the owners, employees, customers, suppliers, authorities and pressure groups. But the external environment that constitutes the PEST (Political, Economical, Social and Technological) factors is relatively remote from what the organisation can control. Without the ability to analyse the strength and weaknesses of the internal and the opportunities and threats of the external environments, managers risk making decisions that are not in the best interest of the organisation. At the same time, worldwide concern about the natural environment has emerged. Current natural environmental concerns are pollution, climate changes, ozone depletion and other global issues like biodiversity, adequate water supplies, population and food security. As McDonald’s concluded, today’s managers have to be concerned not only with the scientific facts but with public perception.

Today’s business environment is characterized with changes, innovations and uncertainty. It is becoming more challenging amid global economic slowdown and turmoil in the financial sector. Businesses must at all cost adapt or die. Out of five businesses experiencing a disaster or extended outage,

a) Two never re-open their doors.

b) One of the remaining three will close within two years.

The business environment is exceedingly tough and competitive. Competition is intensifying in many sectors. Technology is constantly creating new opportunities and threats. There are changes to the regulatory environment: the advent of the Equal Opportunities Act being a clear example. Customer tastes are also changing – providing a moving target. Smart companies operating in highly competitive business environments are working very hard to improve efficiency and productivity, test high-yielding new initiatives, and differentiate themselves from competitors.

Command and Control Management style (as stated in the Classical Management Theories) is effective in an environment where both change and competition are limited and there is plenty room for error (high profit margins). Such is not the case in the age of computing and communications. In today’s business environment, things change very quickly and profit margins are reducing. In addition, more things are happening on a continuing basis. Because of the speed at which things are changing, it is important to push decision-making down in the organization to the level that has all of the information at the time when a decision must be made. This calls for very different management attitudes, it demands a democratic and flexible point of view and of course accountability must be delegated. All these are not present in the Classical Management Theories.

Rapid change that is sweeping through every aspect of the business environment today prompts managers to rethink the ways they do things. Although the Classical Management model has evolved quite a bit, it is still geared to a rigid structure and command-and-control mentality. This model was well tailored to an environment where change was slow and evolutionary rather than rapid and revolutionary. It helped organise processes and foster a sense of accountability, order and discipline. What it lacks is flexibility, making the organisation irresponsive to continuous internal and external environment changes. We have reached a limit to what can be accomplished using the Classical Management approaches. But by changing the way managers do things, that constraint can be removed. This is not to say that the basics of Classical Management should be ignored, but they are just not enough to get the job done in today’s business environment.

Although Classical Management Theories are quite useful in the early stages of economic development, they are not an adequate explanation of how to administer organisations in a complex, developed society. When it comes to seeking cost, efficiency, productivity and profitability improvements, the Classical Management Theories have a limited field of action. Managers need to get used to the idea that what worked yesterday won’t tomorrow. They need to work on tomorrow today. When the business environment becomes more challenging, it is actually an opportune time for managers to think about ways to reinvent their business. We find that new managers are willing to investigate innovative solutions to business problems because they are unhampered by the limitations of tools and methods of the past. It is not so much that established managers are not willing to change; it has more to do with that fact that they are using methods that were designed for different circumstances. And they worked. So, established managers have to be prepared to discard something that has been effective for them. Managers need to use today’s tools to solve today’s problems. They must be willing to learn about new ways of doing things.

To compete successfully in the global arena, managers must now act as entrepreneurs and create new business models - rethink, re-plan, strategize, innovate and learn continuously. Innovation is the most important source for organisations to gain competitive advantage, and advanced innovation management is critical to a business’s sustainable development. Classical Management theories can’t catch up with the dramatic changes of the business environment. Once-reliable guides for managerial actions no longer exist. In an environment virtually bereft of the old rules of conducting business, there is no safety net. Every process, procedure, rule of thumb and standard ratio is being challenged, re-engineered and morphed into a new form. This fundamental change has brought a daunting new reality to the challenge of growing and managing business.

Conclusion

Today, organizations are mostly influenced by the external environment (fierce market share competition, continuous technology change, globalisation, hiring and retaining qualified executives and front line workers) that often fluctuate over time. Yet Classical Management Theories present an image of an organisation that is not shaped by external influences. Classical Management Theories are now gradually fading for the principal reason that people and their needs are considered by Classical theorists as secondary to the needs of the organisation. Nowadays, The Scientific approach is very seriously challenged by Human Resource Management. Furthermore, The Bureaucratic Management is fast giving way to the Matrix Structure in organisations. However, Classical Management theories are important because they introduced the concept of management as a subject for intellectual analysis and provided a basis of ideas that have been developed by subsequent schools of management thought.