Organizational Structures and Management Theories

Posted on Jan 30, 2025 in Business Administration and Innovation Management

An organization is an entity formed by individuals and groups, oriented to the achievement of certain objectives by means of coordinated and directed functions, all this with continuity in time and with the capacity to adapt to constant changes.

  • Entity: Used to name an entity as such.
  • Function: Used to determine the parts of a company when task or function assignation is required, according to different responsibilities.
  • Theory: Resulting from the previous two concepts, the theory emerges that seeks to explain organizations themselves and their organization process.

History

  • Craftsmanship Predominated (antiquity, production designed to satisfy basic needs)
  • Guilds Emerge in the Middle Ages (producers begin to relate to the birth of cities, specialize and direct their production to local markets)
  • Emergence of Banking (from the 12th century onwards, capital began to be concentrated as the basis of future capitalism)

19th Century → Industrial Revolution: Manual labor and animal traction were replaced by machinery for industrial manufacture and the transport of goods and passengers. Rural economy based on agriculture and trade transitioned to an urban, industrial, and mechanized economy. Agricultural production and the nascent industry multiplied. Production time decreased.

Specialization → Division of labor → Organization of the production process.

Frederick Taylor

Frederick Taylor was an American engineer and economist. In 1878, he made his first observations on the organization of work in the steel industry. He conducted studies on measuring the execution times required for each activity, the valuation of jobs, specialization, and on variable remuneration systems by means of bonuses that incentivized the worker’s performance. In 1911, he published “Principles of Scientific Management” (his conclusions). He defends specialization: It is necessary to differentiate between those who think the best way to do the work and those who have greater physical capacity to carry it out. Repetitive tasks lead the worker to gain skill and save time.

Principles

  1. Management must devise a procedure for the execution of each of the work operations.
  2. Management will establish a procedure for selecting, training, and educating workers. Until then, each worker chose his/her own task and learned for himself how to improve it.
  3. Management and workers will work together to ensure that work is carried out in accordance with defined procedures.
  4. Work and responsibility are shared almost equally between management and workers. Management takes responsibility for all work for which it is better qualified than the workers.

Henri Fayol

Henri Fayol was a French engineer contemporary with Taylor. Objective: increase the efficiency of the company through the proper disposition of its governing bodies and structural relations.

While Taylor focused on working methods and tools, Fayol focused on the structure of the organization. “General and Industrial Management” sums up his theory in 14 principles.

Principles

  1. Division of Labor: Seeks business efficiency through specialization.
  2. Authority and Responsibility: Whoever has the authority must also be responsible for the results of its management.
  3. Discipline: Respect for the hierarchy in the organization.
  4. Command Unit: Each employee is accountable to a single boss.
  5. Direction Unit: All members of an organization must be oriented towards the same objectives.
  6. Subordination of the personal interest to the general.
  7. Staff Remuneration: Remuneration must be proportionate to the work performed.
  8. Hierarchy: Respect the chain of command.
  9. Order: Preserve a constant order within the company to avoid unnecessary delays in the search for tools, etc.
  10. Fairness: Equal and fair treatment of all employees.
  11. Staff Stability: The worker must have sufficient time to assimilate the tasks.
  12. Initiative: Contributions from staff should be encouraged.
  13. Unity of Personnel: Maintain a good work climate that favors work.
  14. Centralization: Everything must be oriented towards the Direction. Small companies are very centralized, while as they grow, centralization decreases.

Henry Ford

Henry Ford was an American engineer. In 1891, he joined T.A. Edison’s company. In 1896, he invented the ATV/ Quad. In 1899, he founded the Detroit Automobile Company, which failed. In 1902, his former business partners founded Cadillac.