What is Administrative Management Theory? Definition, Functions, Principles, Contribution, & Limitations

What is Administrative Management Theory?

Administrative management theory is concerned with the management of the whole organizational structure. It consists of making a formal structure, maintaining managerial hierarchy, creating different departments, determining key functions & responsibilities, and division of labor in the workplace.

It focuses on creating different work and functional groups and assigning them required duties and responsibilities based on their capabilities which ensures bringing greater organizational outcomes.

Administrative management theory follows the top-down approach meaning that it first focuses on bringing efficiency to top-level management of the organization believing that the effectiveness of top management ultimately ensures the productivity of lower-level managers. As scientific management was focused on bringing efficiency to lower employees, administrative management is focused on the top level.

This theory is propounded by Henri Fayol (1841-1925) who gave us a comprehensive framework of management that is applicable to all organizations. He was a mining engineer by profession and a French industrialist. His contribution is taken as one of the revolutionary actions in modern management literature. That is why Henri Fayol is also known as the father of modern management. This theory is a member of the classical movement.

In 1916 Fayol published a book in his native language and later on it was translated into English as “General and Industrial Management”. In his book, he has developed different 14 principles which are commonly known as principles of management. He divided a manager’s job into five functions and stated every manager must have certain skills to better perform the given task, and he classified the entire business activities into six categories.

Let’s discuss the functions managers have to perform, the skills needed, business activities, and principles of management according to administrative management theory.

Functions of Management

According to the administrative management of Henri Fayol, a manager has five functions to do in the organization. Henri fayol’s management functions are shortly anointed POCCC, they are:

• Planning – Planning is the first function of a manager, to begin with. It is about forecasting future events, setting goals, and developing means to achieve the goals.
• Organizing – Organizing is building structure and assigning duties to individuals. This includes creating departments, designing jobs, and harmonizing the workplace.
• Commanding – It involves giving orders and instructions to subordinates by superiors. It also includes direct supervision of subordinates and motivating them toward organizational goals.
• Coordinating – It is the action of bringing together all the organizational elements to push their collective efforts towards goal achievement.
• Controlling – It is the continuous reviewing of the performance of activities and identifying the variation to ensure the planned performance meets with the actual.

Industrial Activities

Henri Fayol divided all the industrial activities into six categories and stated what include in these activities. They are:

• Technical Activities – Includes production and manufacturing.
• Commercial Activities – Includes buying, selling, and exchanging.
• Financial Activities – Includes collection and utilization of funds.
• Security Activities – Protection of organizational property and employees.
• Accounting Activities – Stock-taking, cost statistics, and balance sheet making.
• Managerial Activities – These activities include recently discussed management functions of planning, organizing, commanding, coordinating, and controlling.

Skills Managers Need According To Administrative Management Theory

Related: What are Managerial Skills?

Henri has also stated that a manager must have some skills and qualities to perform the organizational task so he will be able to realize the desired goals. He stated six skilled managers need. They are:

• Physical Skills – A manager must have a well-maintained body, good dress-up, healthy body, and energy to perform the given task.
• Mental Skills – He must have the mental ability to analyze different situations and extract the positives from them. He should have the ability to understand the situation and adapt it properly.
• Educational Skills – Managers should also have certain educational skills and knowledge about the functioning of organizations.
• Moral Knowledge – Managers should be ethical and should know what is right or wrong in the workplace.
• Technical Knowledge – Managers should have the technical knowledge to use the necessary tools and machinery in the organization.
• Related Experience – The last one is, that managers should also have some related experience with the tasks given to complete.

Principles of Administrative Management

The 14 principles of administrative management theory are the widely accepted principles that are most commonly referred to as the only principles of management. These are the guidelines Henri Fayol has provided through his experiences and experiments to effectively manage organizational activities.

The 14 principles of management are mentioned below:

Division of Labor

Division of labor is the process of dividing complicated tasks into smaller, more manageable parts. It makes specialization easier at work, which increases productivity and effectiveness. This principle is applicable to both managerial and technical tasks, as well as tasks at all organizational levels.

Authority and Responsibility

According to this notion, responsibility without authority results in irresponsible behavior, whereas responsibility with authority results in inefficiency. As a result, Fayol recommends striking a balance between authority and responsibility.

Discipline

This idea suggests that everyone in the organization should practice self-discipline in order to complete tasks quickly and efficiently. Discipline implies obedience and respect for authority. This involves abiding by the prescribed laws, norms, and orders of the superior.

Unity of Command

According to this principle, a subordinate can only have one superior or one command at a time. When a person receives orders from several superiors at once, confusion and delays in an action result. A subordinate shouldn’t get orders from multiple superiors at once since only one superior can command many subordinates at once.

Unity of Direction

This principle simply means one head, one plan, and one boss. It states that the same direction and instruction should be given to similar types of responsibilities. It aims to create unity of action.

Subordination of Individual Interest to General Interest

Numerous people connected to corporations may have various personal objectives. However, organizations are founded with certain objectives. Both the individual and the organization cannot achieve the goals if people follow their own personal goals and disregard organizational aims.

People must therefore balance their interests with organizational needs. They must acknowledge that the achievement of organizational goals will let them accomplish each individual goal while prioritizing organizational goals (general interest) over individual goals (individual interest).

Remuneration of Personnel

The remuneration principle states that employees should receive fair, transparent, and marketable pay and benefits. Companies should offer their employees both financial and non-financial benefits that meet their basic demands. It should be competitive and based on performance. A fair compensation structure encourages employees to work harder and is beneficial for their morale.

Centralization

According to the centralization principle, top-level management must have the last say on all decisions. This is the approach taken by the central authority in supervising the organizational activity.

This principle holds that, while appropriate levels of authority should be assigned to the subordinates, the ultimate decision-making authority should remain with the top level of management. For an organization to run effectively and systematically, management must strike a balance between centralization and decentralization.

Scalar Chain

The term “scalar chain” describes the hierarchy of superiors and subordinates that must exist for effective authority, direction, and communication. According to this principle, there should be an unbroken chain for command and communication.

Order

The order denotes positioning people, equipment, and objects in the appropriate manner and location to make it simple and quick to access each resource. It states that the appropriate man should be appointed at the appropriate time and location. The appropriate things must be stored in the right place and at the right time for efficiency and productivity.

Equity

Equity refers to fair treatment, equality, or justice in the behavior and performance of each person in the organization. There shouldn’t be any discrimination based on things like geography, religion, caste, creed, or the slang of the management’s closest friends.

This principle guarantees that management and labor have a positive working relationship.

Stability of Tenure

The term “tenure stability” describes how long a person works for a company. According to this idea, the firm must provide adequate assurance of job security.

Employees’ morale suffers due to job uncertainty since they believe they could be fired at any time for any reason, which lowers their effectiveness and efficiency. High turnover is a result of unstable tenure.

Initiative

This initiative principle states that each management must take the initiative to ensure that the task is completed appropriately in order to achieve the organization’s objectives. Every task is made possible by the initiation since it inspires and raises employee morale.

Any plan or policy must be carried out with the participation of managers. As they are granted the ability to take some initiative, subordinates are encouraged to invest their time and energy for the greatest good.

Esprit De Corps

Esprit de Corps refers to strength in unity. This principle states that there must be a joint effort to materialize the goal of an organization as a single effort cannot be enough. Unity always generates team spirit (synergy effect) which can be a strong reason for organizational success. Cooperation increases a positive attitude toward the organization and its goal.

Contributions of Administrative Management Theory

The idea of administrative management theory is very much applicable to modern business practices. Some of the contributions of administrative management can be pointed out below as:

• This theory proposes five management functions as the foundation of the study of management. They are planning, organization, commanding, coordinating, and controlling. Such functions are common in any organization.
• This theory provides fourteen universally applicable principles of management which are taken as basic principles of management in all organizations.
• This theory advocates various skills and knowledge in managers to operate organizations more efficiently and effectively. Thus, managers get encouragement for acquiring skills like physical, mental, moral, educational, technical, and work-related experiences.
• Fayol classified the whole business activities into six categories technical, commercial, financial, security, accounting, and managerial. This helps to identify activities to be done to attain organizational goals and get the right man at the right job.
• It has provided a venue for modern management theories applicable in this complex and dynamic business environment.

Limitations of Administrative Management Theory

Some limitations of administrative management are pointed out below:

• This theory has limited application for complex and dynamic business.
• Fayol’s principles cannot be applied universally in all situations as he claimed.
• Human behavior and relations in the organization are totally ignored in this theory but these things are more crucial in maintaining good industrial relations.
• Workers were treated as tools rather than resources. This theory is also mechanistic, in nature.

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