14 FUNDAMENTAL PRINCIPLES OF MANAGEMENT

FORMULATED BY HENRY FAYO

Different management experts have explained different principles on the basis of their
research. Henry Fayol, a famous industrialist of France, has described fourteen principles of
management in his book General and Industrial Management.
Explaining the difference between principles and elements he makes it clear that the
principles of management are fundamentally true and establish a relationship between cause
and effect, while the elements of management point towards its functions.
While presenting the principles of management Fayol has kept two things in mind. Firstly, the
list of the principles of management should not be long but should be suggestive and only
those principles should be explained which become applicable in most of the situations.
Secondly, the principles of management should be flexible and not rigid so that changes can
be made in them in case of need. The fourteen principles given by Fayol are as under:
(1) Division of Work:
This principle of Fayol tells us that as far as possible the whole work should be divided into
different parts and each individual should be assigned only one part of the work according to
his ability and taste rather than giving the whole work to one person.
When a particular individual performs the same job repeatedly, he will become an expert in
doing that particular part of the whole job. Consequently, the benefits of specialisation will
become available.
For example, a furniture manufacturer gets an order for manufacturing 100 lecture stands. He
has five workers who will do the job. There are two ways to complete this order. First, every
worker should be asked to complete 20 lecture stands.
The second method can be distributing different parts of the lecture stand-legs, top board,
centre support, assembling and polishing-to all the five workers in a manner that only one

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worker does the same job for all the 100 lecture stands. Here, Fayols indication is to the
second way to do this job and not the former one.
The principle of division of labour applies not only to the workers but also equally to the
managers. For example, if a manager is tuned to work on the same kind of activities for a
long period of time, he will certainly be an expert in his particular job. Consequently, more
and beneficial decisions can be taken in a comparatively less time by him.
Positive Effect advantages of specialisation are obtained, such as increase in the quality of
work, increase in the speed of production, decrease in the wastage of resources.
Violating Effect the above-mentioned positive effects of specialisation will not be available.
(2) Authority and Responsibility:
According to this principle, authority and responsibility should go hand in hand. It means that
when a particular individual is given a particular work and he is made responsible for the
results, this can be possible only when he is given sufficient authority to discharge his
responsibility.
It is not proper to make a person responsible for any work in the absence of authority. In the
words of Fayol, The result of authority is responsibility. It is the natural result of authority
and essentially another aspect of authority and whenever authority is used, responsibility are
automatically born.
For example, the CEO of a company has doubled the sales target of the sales manager for the
coming year. To achieve this target, authority for appointing necessary sales representatives,
advertising according to the need, etc. shall have to be allowed. In case these things are not
allowed the sales manager cannot be held responsible for not
(3) Discipline:

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Discipline is essential for any successful work performance. Fayol considers discipline to
mean obedience, respect for authority, and observance of established rules.
Discipline can be established by providing good supervision at all levels, clearly explaining
the rules, and implementing a system of reward and punishment. A manager can present a
good example to his subordinates by disciplining himself.
For example, if the employees break their promise of working up to their full capacity, it will
amount to the violation of obedience. Similarly a sales manager has the authority to do
business on credit.
But in case he allows this facility not to the general customers but only to his relatives and
friends, then it will amount to ignoring his respect to his authority. (Note: Both these
examples give a message of indiscipline which is an undesirable situation.)
(4) Unity of Command:
According to the principle of unity of command, an individual employee should receive
orders from only one superior at a time and that employee should be answerable only to that
superior. If there are many superiors giving orders to the same employee, he will not be able
to decide as to which order is to be given priority. He thus finds himself in a confused
situation.
Such a situation adversely affects the efficiency of the subordinates. On the other hand, when
there are many superiors, every superior would like his orders to be given priority. This ego
problem creates a possibility of clash. Consequently, their own efficiency is likely to be
affected.
(5) Unity of Direction:
Unity of direction means that there should be one head for one plan for a group of activities
having the same objective. In other words, there should be one plan of action for a group of
activities having the same objective and there should be one manager to control them.
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For example, suppose an automobile company is manufacturing two products, namely,

scooters and cars, hence having two divisions.
As each product has its own markets and problems therefore each division must have its own
targets. Now each division must plan its target as per its environmental conditions to get
better results. It is necessary to distinguish between the meaning of the unity of command and
the unity of direction.
Unity of command means that there should be only one manager at a time to give command
to an employee, while the unity of direction means that there should be only one manager
exercising control over all the activities having the same objective.
Unity of Command & Unity of Direction
In this connection Fayol feels that for the efficient running of an organisation the unity of
direction is important, while the unity of command is important to enhance the efficiency of
the employees.
(6) Subordination of Individual Interest to General Interest:
This principle can be named Priority to General Interest over Individual Interest. According
to this principle, the general interest or the interest of the organisation is above everything. If
one is asked to place individual interest and the general interest in order of priority, definitely
the general interest will be placed at the first place.
For example, if a manager takes some decision which harms him personally but results in a
great profit to the company, he should certainly give priority to the interest of the company
and take the decision accordingly. On the contrary, if some decision helps the manager
personally but results in a great loss to the company, then such a decision should never be
taken.
For example, a purchase manager of a company has to purchase 100 tonnes of raw material.
His son happens to be a supplier along with other suppliers in the market. The manager
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purchases the raw material from the firm of his son at a rate higher than the market rate. This
will profit the manager personally, but the company will incur heavy loss. This situation is
undesirable.
(7) Remuneration to Employees:
Fayol is of the opinion that the employees should get a fair remuneration so that the
employees and the owners find equal amount of satisfaction. It is the duty of the manager to
ensure that employees are being paid remuneration according to their work. If, however, they
are not paid properly for their work, they will not do their work with perfect dedication,
honesty and capacity.
As a result, the organisation shall have to face failure. Proper remuneration depends on some
factors like the cost of living, demand of labour and their ability. Fayol feels that in order to
motivate the employees, apart from general remuneration, they should be given some
monetary and non-monetary incentives.
For example, suppose that the things are getting dearer and dearer and the company is getting
good profits. In such a situation, the remuneration of the employees should be increased even
without their asking. If this is not done, the employees will leave the company at the first
opportunity. Expenses shall have to be incurred on new recruitment which shall bring loss to
the company.
(8) Centralisation and Decentralisation:
According to this principle, the superiors should adopt effective centralisation instead of
complete centralisation and complete decentralisation. By effective centralisation, Fayol does
not mean that authority should be completely centralised.
He feels that the superiors should keep the authority of taking important decisions in their
own hands, while the authority to take daily decisions and decisions of less importance
should be delegated to the subordinates.

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The ratio of centralisation and decentralisation can differ in different situations. For example,
it is advantageous to have more centralisation in a small business unit and more
decentralisation in a big business unit.
For example, the decisions in respect of determining the objectives and policies, expansion of
business, etc. should remain in the hands of the superiors. On the other hand, authority for the
purchase of raw material, granting leave to the employees, etc. should be delegated to the
subordinates.
Positive Effect
(i) Decrease in the workload of superiors
(ii) Better and quick decisions
(iii) Increase in the encouragement to the subordinates
Violating Effect
(i) Unnecessary increase in the workload of the superiors in case of centralisation and of the
subordinates in case of decentralisation
(ii) Impatient and wrong decisions by the superiors in case of complete centralisation and
weak decisions by the subordinates in case of complete decentralisation
(iii) Decline in the encouragement to subordinates in case of complete centralisation
(9) Scalar Chain:
(i) Meaning of Scalar Chain:
It refers to a formal line of authority which moves from highest to the lowest ranks in a
straight line,
(ii) Fayols Opinion:
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This chain must be followed in a strict manner. It means each communication must move
from top to bottom and vice versa in a straight line. The important condition here is that no
step (post) should be overlooked during communication.
(iii) Fayols Ladder:
Fayol has explained this principle with the help of a ladder.
For example, in a company the employee F wants to have contact with the employee P.
According to the principle of scalar chain F shall have to reach A through the medium of
E,D,C,B and then having contact with L,M,N,0 shall reach P. Thus F shall have to take the
help of all the nine steps (posts) to have business contact with P.
(iv) Utility:
Due to more clear system of authority and communication, problems can be solved faster.
(v) Gang Plank:
It is the exception of the principle of scalar chain. This concept was developed to establish a
direct contact with the employee of equal rank in case of emergency to avoid delay in
communication.
For example, as shown in the diagram employee F can have direct contact with employee
P. But for doing so employees F and P shall have to seek the prior permission of their
immediate bosses E and O. The details of their talk also shall have to be given to them.
(10) Order:
According to the principle of order, a right person should be placed at the right job and a right
thing should be placed at the right place. According to Fayol, every enterprise should have
two different orders-Material Order for Physical Resources and Social Order for Human
Resources.

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Keeping the physical resources in order means that a proper place for everything and
everything in its right place. Similarly, keeping the human resources in order means a place
for everyone and everyone in his appointed place.
Maintaining these two orders properly will ensure that everybody knows his workplace, what
he is to do and from where he would get his required material. Consequently, all the available
resources in the organisation will be utilised properly.
Gang Plank: A Special Note
Gang Plank can only be established with the employees of the equal or same level. For
example, in the present example no gang plank can be established between F and O.
For example, an employee working in a factory should know the place or source from where
he can get his tools in case of need. Similarly, he should know the place where his supervisor
will be available in case of any need.
It is, however, important to note that it is not sufficient to have an allotted place for a toolbox
and for the supervisor but the availability of both at their decided place is absolutely
important. If this is not the case, it can lead to a heavy loss as a result of damage to the
machines.
(11) Equity:
This principle tells that the managers should treat their subordinates in a just and kind manner
so that they develop a feeling of dedication and attachment for their work. All the employees
should be treated equally and impartially.
Fayol tells us in connection with this principle that there should not be any equality of
treatment between a person whose work is really good and a person who is a shirker by
nature.

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Rather, the latter should be treated sternly. Doing so would be equitable. It is because of this
point of view that Taylor has presented his differential remuneration method.
(12) Stability of Personnel:
From the point of view of management it is absolutely harmful to change the employees
frequently as it is a reflection of inefficient management. Therefore, according to this
principle there should be stability of tenure of the employees so that the work continues
efficiently.
Fayol thinks that instability in the tenure of employees is a cause of poor management and
results. High rate of labour turnover will result in increased expenses because of selecting
them time and again, and giving them training afresh.
It also lowers the prestige of the organisation and creates a feeling of insecurity among the
employees which keeps them busy in finding out new avenues of work. Consequently, the
sense of dedication cannot be created among them.
For example, it is true that if the workers in a company are not treated well and the
atmosphere in the company is also unhealthy, the employees will not stay for a long time. In
other words, they will leave the company at the first opportunity available. This situation is
absolutely harmful.
For example, a labourer completes 10 units of goods in a day. Another labourer who happens
to be a relative of the supervisor completes 8 units but both get equal remuneration. This
violates the principles of equality. The second labourer should get less remuneration than the
first one.
(13) Initiative:
Initiative means the capacity to work while expressing ones thoughts. According to Fayol, it
is the duty of the manager to encourage the feeling of initiative among his employees for
doing some work or taking some decision but within the limits of authority and discipline.
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It will be possible only when the manager will welcome the thoughts of his/her subordinates.
By doing so the subordinates will present new and useful ideas time and again and gradually
they will become an integral part of the organisation. In order to make this process a success
a manager will have to abandon his false sense of prestige.
For example, a salesman suggests to his sales manager to implement a new advertisement
technique. The sales manager sends him away by telling him that it is not possible and
ignores the suggestion altogether.
In such a situation the salesman, who has been admonished and belittled, will never venture
to offer any suggestion in future because his desire of taking initiative has been suppressed.
On the contrary, if his suggestion had been listened to carefully (even though not to be
implemented) he could have taken the courage to offer some suggestion in future. Such an
action would simply have encouraged his initiative.
Positive Effect
(i) Increase in the thinking power of the employees
(ii) Cooperation of the employees in implementing decisions
(iii) Increase in the sense of attachment to the organisation Violating Effect
(iv) Decline in the thinking power of the employees
(v) An atmosphere of non-cooperation
(vi) Decline in the employees attachment to the company
(14) Esprit de corps:
As per this principle, a manager should continuously make efforts to develop a team spirit
among the subordinates. To do this, he/she should use the word We instead of during the
conversation with subordinates.
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