Management, the process of achieving goals through the coordination of efforts, is vital to business growth as they provide clarity and direction for employees to work efficiently and effectively (Olum, 2004). Fayol’s principles of management were pivotal in influencing management structures and styles since its inception in the early 20th century. This period was heavily driven by industrial capitalism, a labour-intensive production and manufacturing economy (Liagouras, 2005). However, the relative importance and applicability of Fayol’s principles of management in the 21st century have been subject to considerable debate, as the paradigm has shifted into a post-capitalist era—a knowledge-based and digital economy that focuses on service-delivery (Liagouras, 2005).
This shift and element of change have called for a major review of management styles from a classical standpoint, such as the one as derived from Fayol’s principles, to contemporary theories which place more gravitas on the human aspect of organisations. For example, the human relations theory that draws on employees’ skills to support knowledge-driven functions. There are various perceptions that deem Fayol’s principles as an extraneous stretch to post-capitalist ideas of management, but the basis of what these principles mean to project appears to be poorly understood. This paper attempts to show that Fayol’s principles still remain pertinent and important to the current knowledge-based economy, and will draw on analyses and comparisons between Fayol’s principles and ideas proposed by human relations theorists. This will prove that there is no major difference in the objectives of both classical and contemporary ideas of management as both theories ultimately aim to positively influence efficacy and efficiency within organisations (Overvold, 1987).
To start off, the main idea of the human relations theory is the appeal to the humanistic aspect of the organisation, where it is believed employees should be allowed to attain self-fulfilment through organisations, and the resulting sense of satisfaction and higher esteem will motivate them to exert higher levels of productivity which will, in turn, benefit both the organisation and the individual (Overvold, 1987). Throughout this paper, this concept will be elaborated and juxtaposed with Fayol’s principles, focusing primarily on “discipline”, “equity” and “centralisation” (Fayol, 1949). To study these concepts in detail, it is necessary to introduce two forms of structures which Yang (2016) labels as “organic” and “mechanistic”, that are highly reflective of the two theories —the “organic” structure, where operations are flexible, decentralised and reflects the concept of the human relations theory; the “mechanistic” structure, where operations are highly-formalised, centralised and reflects the concept of Fayol’s principles.
In the section that follows, two of Fayol’s principles, “discipline” and “equity”, will be discussed alongside to provide a holistic dialogue. Firstly, “discipline” refers to rules, agreements and procedures being as clear as possible (Fayol, 1949, p.22; Fells, 2000) to drive productivity, and this again makes a reference to a mechanistic structure where employees are given rigid guidelines for clarity and guidance.
One criticism of much of the literature on the above approach is that the rigidity causes a very formalised environment, which may potentially stifle motivation and job performance. The outlook of human relation theorist, Chester Barnard, is that cooperation from workers should be elicited willingly through communication and leadership skills (Parayitam, White and Hough, 2002) to increase job performance. Barnard stressed that an informal environment can only be fostered and facilitated thorough constant reassessment of the factors in the environment and the organisation must be willing to change its objectives and its course of attaining it (McMahon and Carr, 1999). However, whilst this would help to create a dynamic organisation with an organic structure, a disadvantage is that the fluidity also translates into a lack of formal protocols and guidelines.
The drawback in Barnard’s approach is that it neglects the fact that employees in organic structures experience high uncertainty due to the fluidity and lack of guidelines (Yang, 2016). The idea of uncertainty is tightly linked to another of Fayol’s principle, “equity”, which simply put, refers to the fairness of treatment (Fayol, 1949, p.39). This principle is important in this discussion as it ties in another limitation of the human relations theory— involving the idea of perceived fairness by employees due to the state of uncertainty in organic structures. To substantiate this, a study by Yang (2016) discussed that when employees regard their work environment as “political”, where policies and protocols are replaced with rewards influenced by unwritten rules that can be self-serving, they perceive high levels of unfairness. Yang (2016) also states that this leads to lower job performance as employees tend to believe their personal efforts will not be adequate to influence their situation. In short, unfair treatment—work politics as in this case—is strongly linked to negative performance, but is perpetuated by the uncertainty in organic structures (Yang, 2016) which is fostered in environments driven by principles of the human relations theory. In this case, Fayol’s principles of “discipline” and “equity” might be better observed to drive motivation and hence positive job performance as compared to the human relations theory, due to the established certainty and fairness in mechanistic structures.
Another principle of Fayol’s is “centralisation”, which introduces the idea of authority being held in the upper tiers of management, and passed downwards to employees, but Fayol stressed that it is important for an organisation to attain an optimum balance between the degree of decentralisation and centralisation in an organisation (Fayol, 1949, p.33; Fells, 2000). Yet, with the progress of the economy into a knowledge-based function, there is a supposed need for employees to target tasks with personal expertise and problem-specific mindsets, therefore contemporary views such as the human relations theory tend to heavily lean towards the prospect of decentralisation (Rodrigues, 2001) to allow employees exert authority as well. To support this, Rensis Likert, a human relations theorist, categorised management into 4 styles; ranging from system 1, a highly-autocratic structure to system 4, which is a decentralised, participative system that involves high group involvement in decision-making (Likert, 1981; Morris and Pavett, 1992). System 4 is deemed the ideal system for productivity and efficiency as it aims to drives high motivation through synergistic problem-solving (Likert, 1981).
However, there is an inconsistency within modern views, as it is possible to suggest that even decentralisation could give rise to the inefficiency in the context of decision-making. This is because decentralisation could delay decision-making processes, especially when urgent and spontaneous decisions need to be made (Rastogi, 1987), which could be perpetuated if the organisation is bigger as it would require consolidation of an increased number of perspectives. Paradoxically, under stressful conditions, making decisions in a synergistic and participative style could cause disharmony (Rastogi, 1987), an opposite effect that is desired from cooperation and democratic participation.
Comparing Fayol’s principles and the human relations theory generally, it is clear that contemporary views place a higher focus on navigating organisations towards organic structures to allow greater personal development through willing cooperation and higher involvement in decision-making. Fayol’s principles are challenged to be outdated and irrelevant, but as proven, there are certain drawbacks of modern theories that Fayol’s principles are able to avoid. Furthermore, delving deeper into the contradictions of the human relations theory, there is an assumption of an ideal environment where employees are assumed to have no capacity for anti-social behaviour and are able to engage optimally (Sarachek, 1968). Perhaps the more pressing argument is that organisations are unlikely to value employees’ interests over the organisation’s interests if the resulting behaviours are undesirable (Rodrigues, 2001) or conflicting with the organisation’s goals. Hence failing to resolve the hypocrisy that for the pursuit of individual fulfilment to matter, there must positively be an overlap or synchrony between goals of individuals and organisations (Overvold, 1987; Sarachek, 1968), otherwise, there will be an obstruction in personal development.
While it is perceived that Fayol’s principles do not allow for personal development, this can be refuted as there is evidence to suggest that Fayol does place importance on allowing subordinates to attain satisfaction through the nurturing of initiative, another one of his principles (Fayol, 1949, p.39; Fells, 2000). This further proves that Fayol does not disregard human emotions and development, but rather seeks to uphold it in line with other principles to securely accommodate the wider interest (Fayol, 1949, pp.38-40; Fells, 2000).
To reiterate, modern management views are exploring the means to provide the freedom to drive employees to achieve, whilst the classical principles, albeit more mechanistic and rigid, are more specific and thus provides the guarantee in directing employees to achieve said goals. It may appear that Fayol’s principles are compromising the humanistic aspect of management and hence lack the ethical appeal (Sarachek, 1968), but as proven, the classical theory is able to empower employees to achieve efficiency and effectiveness nevertheless. The efficacy of this theory is further recognised as observably, many organisations still employ and function in mechanistic structures today. While it is important to note that the management style discussed may not necessarily yield the same level of efficacy across every organisation (Overvold, 1987), the notion that Fayol’s principles have lost its relevance to post-capitalist ideas of management in a knowledge-based economy is clearly disproved.
Ultimately, the objective of the two theories is to maximise the productivity of employees to meet organisation goals. The difference between the human and classical theory is simply in the establishing of the type environment that best befits the organisation to empower and drive employees. To reiterate, this means that the underlying purposes and elements of human and classical theories are not conflicting but rather corollary, although the means of execution might be different. While the coined “ethical appeal” of the human relations theory (Sarachek, 1968) seems superior to the classical theory in the new knowledge-based and digital economy, in reality, it does not supersede Fayol’s principles in a post-capitalist era of management as they still remain highly useful and relevant.