PRINCIPLES OF MANAGEMENT

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:

 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 worker does the same job for all the 100 lecture stands.
Here, Fayol’s 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 specialization
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 specialization will not be available.

 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

 Discipline:
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.)

 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.

 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. 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.

 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 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.
  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.

 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.

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
 Decrease in the workload of superiors
 Better and quick decisions
 Increase in the encouragement to the subordinates

Violating Effect
 Unnecessary increase in the workload of the superiors in case of
centralisation and of the subordinates in case of decentralisation
 Impatient and wrong decisions by the superiors in case of complete
centralisation and weak decisions by the subordinates in case of
complete decentralisation
 Decline in the encouragement to subordinates in case of complete
centralisation

 Scalar Chain:
 Meaning of Scalar Chain:
It refers to a formal line of authority which moves from highest to the lowest
ranks in a straight line,

 Fayol’s Opinion:
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.
  Fayol’s 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’.

 Utility:
Due to more clear system of authority and communication, problems can be
solved faster.

 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.

 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-Materials Order for Physical
Resources and Social Order for Human Resources. 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.

 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. 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.

 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.

 Initiative:
Initiative means the capacity to work while expressing one’s 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.

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
 Increase in the thinking power of the employees
 Cooperation of the employees in implementing decisions
 Increase in the sense of attachment to the organisation Violating Effect
 Decline in the thinking power of the employees
 An atmosphere of non-cooperation
 Decline in the employees’ attachment to the company

 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.