A Business Encyclopedia

Classical Theory

Definition: The Classical Theory is the traditional theory, wherein more emphasis is on the organization rather than the employees working therein. According to the classical theory, the organization is considered as a machine and the human beings as different components/parts of that machine.

The classical theory has the following characteristics:

  1. It is built on an accounting model.
  2. It lays emphasis on detecting errors and correcting them once they have been committed.
  3. It is more concerned with the amount of output than the human beings.
  4. The human beings are considered to be relatively homogeneous and unmodifiable. Thus, labor is not divided on the basis of different kinds of jobs to be performed in an organization.
  5. It is assumed that employees are relatively stable in terms of the change, in an organization.
  6. It is assumed that the authority and control should be vested with the central authority only, in order to have a centralized and integrated system.

Some writers of the classical theory emphasized on the technological aspects of the organization and how the individuals can be made more efficient, while others emphasized on the structural aspects of an organization so that individuals collectively can be made more efficient. Thus, this purview of different writers resulted in the formation of two distinct streams:

  • Scientific Management Stream
  • Administrative Management Stream

Thus, according to this theory the human beings are just considered as a means of production.

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