Professional Documents
Culture Documents
Management Theories
Principle 1:
In a bureaucracy, a manager’s formal authority derives from the position he or she holds in the
organization.
Authority - the power to hold people accountable for their actions and to make decisions in reference to
In today’s business models, this type of theory is not very common. Nowadays, we see more of an
informal authority approach in which there is personal expertise, technical knowledge, moral worth, and
the ability to lead and to generate commitment from subordinates, without the use of this absolute power
Principle 2:
In a bureaucracy, people should occupy positions because of their performance, not because of their
social standing.
Some organizations and industries are still affected by social networks in which personal contacts and
relations, not job-related skills, influence hiring and promotional decisions. (Textbook / Contemporary
The old ways, of not what you know, but who you know, are still around in today’s society, but it can only
get you so far. In today’s business world, what you know and educational knowledge, play a very important
part in moving up the corporate latter and being able to maintain a managerial position requires the
Principle 3:
The extent of each position’s formal authority and task responsibilities, and its relationship to other
When the task and authority associated with various positions in the organization are clearly
specified, managers and workers know what is expected of them and what to expect from each
Most organizations should and are clearly defining task and position responsibilities. Job
descriptions should include all facets of an employee held position. Clarification of one’s job
expectations is essential for all five business functions in order to manage and maintain a high level,
Principle 4:
Managers must create an organizational hierarchy of authority that makes it clear who reports to
whom and to whom managers and workers should go if conflicts or problems arise. (Textbook /
Today’s business models utilize the initiative factor in which employees are given the ability to act on
their own, without direction from a superior. This empowerment of employees relieves the stress of
constant supervision and allows supervisors and managers to concentrate more on other
administrative duties. The balance between a vertical and horizontal organizational structure is more
Principle 5:
Managers must create a well defined system of rules, standard operating procedures, and norms so that
Standard Operating Procedures (SOPs) are specific sets of written instructions about how to perform a
Most companies have SOPs and require employees to learn and follow them. We have seen how in
addition to following rules and regulations, many organizations have allowed for creativity and innovation
to supersede the common way of conducting business where it was once said, “rules are rules and they
could never be broken”. Guidelines are needed and common sense is always important, but have an open
line of communication to new ideas and thoughts is essential in today’s business society.
Division of Labor
This is a potentially good practice for institutions whose workers deal with
highly technical or repetitive tasks. Tasks that require innovation and a
creative exchange or with workers who are required to have cross-
departmental knowledge may not benefit from Division of Labor.
Managers have the right to give orders and demand obedience (formal).
Managers gain authority derived from expertise, technical knowledge,
moral worth, and ability to lead and generate commitments from
subordinates (informal).
Unity of Command
Line of Authority
Clearly defined and limited chain of command from the top to the
bottom levels.
Allows for cross departmental interaction of middle managers to
speed decision making.
Centralization
Unity of Direction
An organization that does not have a single purpose and plan becomes
inefficient and unfocused. If managers and workers have a different
focus or direction, not all of the organization’s resources are used
towards the legitimate goal.
Equity
Order
Initiative
Example:
Many retailers have empowered their cashiers to perform price over-
rides without the need for a supervisor to approve the change.
More and more companies are empowering their call center agents to
perform one-time fee reversals without the approval of a supervisor.
Discipline
Example:
A manager may ask an employee to stay late or work weekends in order
to complete an assignment. If the manager has always been courteous
and respectful of the employee, then they may be more willing to oblige
to the managers request.
Renumeration of Personnel
Example:
Company “A” pays up to twenty percent of an employees salary.
Employee “X” annual salary is $75K. In other words, employee “X” can
make as much as $15K in annual bonus.
Example:
Consider employees that grow within a company. Companies are often
more willing to hire and promote from within because employees may
already possess certain job function skills and technical knowledge of
the applications, which usually leads to a lower cost of training.
Furthermore, since the employee has already been exposed to the
environment, he/she may be more well equipped to come up with the
right approaches to handle certain situations.
Example:
Sports teams, like any other business, consist of upper management
executives (CEO, President, GM), managers (coaches) and players
(employees). Keep in mind though that in this business, some players tend to
make more money than some of those positions above them. Players that are
selfish, unwilling to adapt and change to the philosophy set forth by the teams
management may find themselves being released or traded.
Example:
A compliance officer notices that communication between the compliance department
and the business unit is lacking cohesiveness. The employee, knowing that their boss
is willing to listen to their opinions, can suggest that a liaison, someone with
experience in both areas of the business, be hired to facilitate communication and
ultimately satisfy the needs of both departments.