Exam Prep

Chapter 9

Fayol & Weber

Henry Fayol was a french mining engineer in the late 1800s and early 1900s. He wasn’t some academic prodigy, but he did take over a failing mining business and made it successful. For some historical background on the Henry Fayol, he was born into the time of the second industrial revolution. The organization inside the companies was chaos, managers didn’t get training. His ideas about 14 organizational principles are all written in the book he wrote in 1916, they still serve as supporting pillars inside big corporations till today.

Max Weber was born in Germany in 1864, he grew up at a time where industrialization was transforming the government. He was deeply interested about why capitalism worked in one countries, but not in the other. In 1904 h visited the U.S. to study their economy. He noticed how two counties differed from each other. Germany relayed more on their traditions, that is how Max Weber came to the conclusion of bureaucracy, a rational authority that relied on giving the power to the most qualified and skilled people.

Centralization vs. Decentralization

Centralized authority is what we have seen in a lot of big companies. I would even call it the “traditional” way of running anything, really. Centralization focuses on having a few people in power, that can extent their authority to the people lower than them in rank. One of great examples of centralized authority would be military, as you answer to people higher in rank. It keeps greater control on the company and lets efficiency flourish in certain operations. Yet the disadvantages would be less responsiveness to local customers or employees, potential inside conflicts or lower moral of those who work in the top management.

Decentralization is a system we see more often in today’s world. It is the authority that empowers employees to do the decision making. It is a complex structure that allows for faster decision making, higher employee morale, but it’s a double sided coin. It reduces efficiency, the top management has less power over their employees and it might weaken their corporate image.

Organizational Structures

Tall structures are charecterized by a narrower span of control. It’s a complex figure that focuses on having fewer people per manager, making use of more managers and authority figures. Flat structures are focused more on one manager per a bigger group of people. It makes the structure less complex and confusing to those under it. A functional structure refers to dividing people into groups with similar responsibilities, skills or expertise.

Tall structure- traditional manufacturing company, where operations were divided into ceveral layers of management that oversaw small teams.

Flat structure- a startup where co-founders make desisions with small teams of people

Functional structure- big corporations