There are several core premises each for both the classical and neoclassical perspectives of organizational management – with similarities and differences between the two schools of thought. The classical perspective is characterized by its key assumptions that a) Organizations’ purpose is to achieve output-related and financial goals, b) The scientific method is the means to discovering the best organizational structure for the aforementioned goals, c) Job specialization and division of labor maximize production, and d) Rational economic principles dictate how people and organizations act (Jang, Ott, Shafritz 2005:28). The quintessential classical theorists include Max Weber, Henri Fayol, Fredrick Taylor, and Luther Gulick. Weber described bureaucracy as the ideal organizational structure for rationality and efficiency with the characteristics of clearly defined rules, impersonality, hierarchy/levels of authority, and training of employees (Jang, Ott, Shafritz 2005:73-74). Fayol articulated general principles of management – characteristics under which the ideal organization operates which include division of labor, authority and responsibility, discipline, unity of command, unity of direction, subordination of individual interest to general interest, and remuneration of personnel (Jang, Ott, Shafritz 2005:48-52). Taylor (1915) championed what he called “scientific management”, a philosophy in which the scientific method applies to the management of an organization and the workers therein to increase productivity. So meticulous was Taylor in his concept of applying scientific evidence to factory jobs, that he conducted “time studies” in which a stopwatch was used to time a worker’s motions – the idea being there is one best method for performing any physical task. (NetMBA 2002-2010) Perhaps less radically, Taylor also advocated for careful selection and training of workers by management, as well as the familiar classical principle of dividing work according to specialization. Gulick (1937) considered the merits of building an organization from the top-down and the bottom-up; and contributed his idea of organizing the executive according to his acronym “POSDCORB”: Planning, Organizing, Staffing, Directing, Coordinating, Reporting, and Budgeting (Jang, Ott, Shafritz 2005:86). Gulick described the functions of this acronym as ideally being subdividing among the executive – wherein the executive is not just the chief executive, but other offices and departments including the chief executive’s private secretary (Jang, Ott, Shafritz 2005:86).
The neoclassical theory of organizational management accepts the basic tenets of classical theory but adds several points to challenge and expand upon it. These points are a) The human factor in organizations: How people in the organization will cooperate with each other in an organization and how much they will be committed to organizational values and goals – particularly in the mechanistic, bureaucratic organizational model Weber constructed, b) The importance of internal-external organizational relations, and c) Decision-making processes (Jang, Ott, Shafritz 2005:88). The human factor in organizations was explored by Barnard (1938), who emphasized the importance of motivating workers properly to work within a cooperative organizational system. Barnard articulated a method of incentives that gave more consideration to motivating factors such as opportunity for power, position, and prestige, beneficial social relationships at work, greater participation in decision-making, than to monetary compensation.
Underlying assumptions about human nature of classical and neoclassical theory
The classical school assumes that organizations are primarily concerned with tangible, economic rewards (profits), and that organizations should be constructed according to the general and/or scientific...