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CHAPTER -2
PRINCIPLES OF MANAGEMENT
MEANING OF PRINCIPLES OF MANAGEMENT:

Principles of management are broad and general guidelines for decision making and
behavior of managers.

The principles serve as general practical guidelines to the managers for making decisions,
taking action and solving various problems systematically. They are not rules, but only a
guide to action. Principles are applicable to different kinds of organizations such as
business, hospitals, clubs and educational institutions, etc.

Difference between management principles and pure science principles:

Basis Management principles Pure science principles


1. Flexibility They are flexible. They are rigid in nature.
2. Application They have to be applied creatively They are applied in static and
as they deal with unpredictable absolute manner.
human behavior.
3. Relation with They have to keep pace with They are not required to keep
environment changing environment as human pace with changing environment
behavior is never static. as they do not change with time.

Difference between management principles and management techniques:

Basis Management principles Management techniques


1. Meaning They are guidelines to take They are methods or
decisions or actions. procedures, which involve series
of steps to be performed to
accomplish goal.
2. Flexibility They are flexible. They are not so flexible.

Difference between management principles and values:

Basis Management principles values


1. Meaning They are guidelines to take They are general rules for
decisions. behavior of individual in the
society.
2. Formation They are formed after research in They are formed through
work situations. common practice.
3. Nature They are technical in nature. They are ethical in nature.

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NATURE OF PRINCIPLES OF MANAGEMENT:

1. Universal application: the principles of management can be applied to all types of


organizations irrespective of the size and nature. For example: principle of division of
work is applied in government offices, private companies, hospitals, schools, and
clubs everywhere. Only the degree of specialization varies from organization to
organization.
2. General guidelines: Management principles are guidelines to actions but these
principles do not provide readymade solution for any problem. For example: the
principle of stability of tenure consist of giving a stable time period to employees to
settle down but how much time period to be given 6 months, 1 year, etc. vary from
company to company.
3. Formed by practice and experiments: the management principles are developed
only after deep and thorough research work. They are evolutionary in nature. For
example: it is a matter of common experience that “Discipline” is crucial to achieve
any purpose.
4. Flexible: the management principles are not rigid. They can be applied differently
under different conditions. They can be modified by the managers who are using
them.
5. Mainly behavioural: Management principles are formed to guide and influence the
behavior of employees. For example: principle of discipline improves the
commitment of employees towards the organization.
6. Cause and effect relationship: Management principles are based on cause and
effect that means these principles tell us if a particular principle is applied in a
situation, what might be the effect.
7. Contingent: management principles are contingent or depend upon the situations
prevailing in the organization. The application of principle has to be changed with
change in situation.

SIGNIFICANCE/ IMPORTANCE OF MANAGEMENT PRINCIPLES:

1. Providing managers with useful insights into reality: Management principles


act as guidelines for the managers. These principles improve knowledge, ability
and understanding of managers under various managerial situations. The effects
of these principles help the managers to learn from their mistakes. These
principles guide managers to take right decision at the right time.

2. Optimum utilization of resources and effective administration: the


management principles suggest to cut down the wasteful movements and setting
up of standard time to complete the task. Principles are designed to get maximum
benefits from the human efforts and other resources. These principles act as
guidelines and base to form various administrative policies to have systematic
working in the organization. Principles of management limit the boundary of
managerial discretion so that their decisions may be free from personal prejudices
and bases.
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3. Scientific decisions: Decisions are based on facts, thoughtful and justifiable in


terms of the intended purposes. They must be timely, realistic and subject to
measurement and evaluation.

4. Meeting changing environment requirements: every businessman has to make


changes in the organization according to the changes taking place in the business
environment. Management principles train the managers in implementing the
changes in right direction and at right level in the organization.

5. Fulfilling social responsibility: Principles of management not only help in


achieving organizational goals but also guide managers in performing social
responsibilities. Example: “Equity” and “Fair remuneration”.

6. Management training, education and research: principles of management are at


the core of management theories. These act as base for management training,
education and research. These principles provide organized body of knowledge to
perform research work and generate more and more knowledge; they have
provided new ideas, imagination and base for research and development.
Professional courses such as BBA, MBA also teach these principles as part of their
curriculum. All the management institute take aptitude test and these tests are
based on management principles only.

FAYOL’S PRINCIPLES OF MANAGEMENT:

HENRY FAYOL was born in France in 1841. He got degree in mining engineering in 1860
and started working as engineer in a coal mining company. In 1888, he was promoted as
the managing director of the company. At that time the company was in the situation of
insolvency. He accepted the challenge and applied his managerial techniques to bring out
the company from this situation and he succeeded. When he retired after 30 years the
company was a leading coal-steel company with strong financial background.

MAJOR CONTRIBUTIONS OF FAYOL:

Henry Fayol became famous as “Father of Management studies and thoughts”, because
of his following contributions:

 He made clear distinction between technical and managerial skill.


 He identified the main steps in the process of management which are considered the
major functions of management – planning, organizing, staffing, directing and
controlling.
 He developed fourteen principles of management which act as guidelines for
managers to perform managerial activities.

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PRINCIPLES OF MANAGEMENT DEVELOPED BY FAYOL:

1. DIVISION OF WORK: According to this principle the whole work must be divided
into small tasks or units and instead of assigning the whole work to one person one
task or unit of work should be assigned to one person according to the capability,
qualification and experience of the person. When a person is performing a part of job
again and again he will become perfect and specialized in doing that and the
efficiency level will improve.
Fayol said not only the factory work but technical, managerial and skill jobs should
also be divided into small segments for specialization.
In bank one person is receiving cash, one is giving cash, one is making entry in pass
book, one is giving loan, one is doing F.D., etc. So work is divided and bank operates
efficiency.

2. AUTHORITY AND RESPONSIBILITY: Authority means power to take decisions.


Responsibility means obligation to complete the job assigned on time. According to
this principle, there must be balance or parity between the authority and
responsibility. Excess of authority without matching responsibility may bring
negative results and excess of responsibility without matching authority will not
allow the worker to complete his job on time.
An organization should build safeguards against misuse or abuse of managerial
power. A manager should have the right to punish the subordinate for willfully not
obeying a legitimate order but only after sufficient opportunity has been given to a
subordinate for giving his/her arguments.

3. DISCIPLINE: Discipline is the obedience to organizational rules and employment


agreement which are necessary for the working of the organization. According to
Fayol, discipline requires good superiors at all levels, clear and fair agreements and
judicious application of penalties.

4. UNITY OF COMMAND: according to this principle and employee should receive


orders from one boss superior and should be accountable to one superior only
because if he is receiving orders from more than one boss then he will get confused
and will not be able to understand that whose orders must be executed first.

5. UNITY OF DIRECTION: All the units of an organization should be moving towards


the same objectives through coordinated and focused efforts. Each group of activities
having the same objective must have one head and one plan. This ensures unity of
action and coordination.

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Difference between Unity of Command and Unity of Direction:


Basis Unity of Command Unity of Direction
1. Meaning One subordinate should Each group of activities having
receive orders from one same objective must have one
superior and should be head and one plan.
responsible to only one
superior.
2. Aim It prevents dual It prevents overlapping of
subordination activities.
3. Implications It affects an individual It affects the entire
employee. organization.

6. SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST: According


To this principle the interest of organization must take priority over the interest of
individuals or employees. In the organization all the employees are working with
some objective and there is always an objective of organization. Managers must take
all the decisions in the organization be giving priority to organizational interest and
not his personal interest. The manager can ensure this by his exemplary behavior by
not misusing is authority for personal favors.

7. REMUNERATION OF EMPLOYEES: According to this principle employees in the


organization must be paid fairly or adequately to give them maximum satisfaction.
The employees should be paid fair wages and salaries, which would give at least a
reasonable standard of living. At the same time it should be within the paying
capacity of the company.

8. CENTRALISATION AND DECENTRALISATION: Centralisation refers to


concentration of authority or power in few hands at the top level. Decentralization
means evenly distribution of power at every level of management. According to
Fayol a company must not be completely centralized or completely decentralized but
there must be combination of both depending upon the nature and size of the
organization. A small organization can be well organized and managed with
centralized technique but in large organization there is need for decentralization.

9. SCALAR CHAIN: Scalar chain means line of authority or chain of superiors from
highest to lowest rank. Fayol insists that this chain must be followed strictly in the
organization. Every information must pass through every key of this chain, no
skipping of any one key should be allowed.

Fig. explains the principle:

According to scalar chain principle if E wants to contact O he has to move through E-


D-C-B-A-L-M-N and then O. If this chain is broken then there are chances of
communication gap in the organisation but sometimes following scalar chain
becomes a long process and if some important information has to be passed, it gets

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delayed so in case of emergency and urgent information, Fayol permitted a short cut
in the chain which is called Gang plank. Gang plank permits direct communication
between the employees working in different position without following the scalar
chain. For example, if E wants to pass urgent information to O then instead of
following scalar chain route, he can directly communicate with O by constructing a
gang plank.

10. PRINCIPLE OF ORDER: In this principle order does not mean command but it
refers to orderly arrangement of men and material that is a fixed place for everything
and everyone in the organisation. Fayol insists that there must be a fixed place to
keep every material and thing used in the organisation and fixed place or seat or
cabin for every employee of the organisation so that no time and energy is wasted in
search of any material or any person.

11. PRINCIPLE OF EQUITY: Equity refers to kind, fair and just treatment to
employees. Employees will put their maximum efforts only when they are treated with
kindness and justice. Equity means no discrimination on account of sex, religion,
language, caste, belief or nationality.

12. STABILITY OF TENURE OF PERSONNEL: It refers to no frequent termination


and transfer. According to this principle the management must provide the feeling of
job security among the employees because with the feeling of insecurity for the job,
the employees cannot contribute their maximum. Frequent turnover of employees is
bad for organisation and such decision must be taken when they are almost
unavoidable.

13. INITIATIVE: Initiative refers to taking the first step with self motivation. Fayol
suggested that employees in the organisation must be given an opportunity to take
some initiative in making and executing a plan. It gives immense satisfaction to
employees. So managers must welcome the suggestions and ideas of employees
before framing the plan.

14. ESPIRIT DE CORPS: Management must encourage and promote team spirit,
unity and harmony. This will bring coordination and cooperation in organisation. A
manager should replace “I” with “WE”. This will give rise to mutual trust and
belongingness among team members. It will minimize the need for using penalties.
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TAYLOR’S SCIENTIFIC MANAGEMENT:

F.W.TAYLOR was born in USA in 1856. In 1878 he joined Midval Steel Company as a
mechanical engineer. Using his engineering background Taylor set out scientific
studies and techniques. He was primarily concerned about the efficiency of workers
and optimum utilization of resources. Taylor’s principles and techniques were based
on the observations he conducted in factories where methods of production lack
planning and working methods were haphazard.

Contributions of Taylor:

F.W. Taylor became famous as a father of scientific management. His main


contributions which made him so popular were:
 Taylor published books and research papers explaining his scientific view on
industrial organisation and management.
 His major contribution was publishing of “shop management”, “piece rate
system” and “principles of management”.
 He emphasized on adoption of scientific methods to the problems of
management.

Meaning of scientific management:

Scientific management can be defined as “application of science for each and


every element of management.” In general language it means apply scientific tools,
methods and trained personnel in order to increase the output. Scientific
management insists on replacement of rule of thumb by science that means
decisions in the organisation should not be taken on the basis of wills and wishes of
manager but decisions must be based on scientific studies conducted by using
scientific tools.

“Scientific management means knowing exactly what you want men to do and seeing
that they do it in the best and cheapest way.”

F.W. TAYLOR

Scientific principles of management:

1. Science, not rule of thumb: According to this principle Taylor insists that
each job performed in the organisation should be based on scientific enquiry
and not on intuition, experience and hit and miss methods. He says that there
must be thinking before doing which is not in case of rule of thumb. Rule of
thumb means dictatorship of manager whereas scientific decisions are based
on cause and effect and scientific measurement of methods and ways of
production.
Taylor insisted on introduction of scientific inquiry into the domain of
management practice. Taylor believed that there is only one best method to
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maximize efficiency this method can be developed through work study and
analysis. The method so developed should be substitute of rule of thumb.

2. Harmony, not discord: according to this principle those who work together in
an organisation must work in harmony that is with mutual give and take and
proper understanding. Generally in every organisation there are two groups of
people- workers group and management group and both the groups work as
rivals of each other as workers feel that they are underpaid and are
overburdened with the work and management always feel that workers are
good for nothing. In this principle Taylor insists that there is need for both
the groups to change their attitudes for each other. He insists on mental
revolution which means complete change of attitude and outlook for each
other. They must develop positive thinking for each other and work with
harmony and avoid discord as their objectives are in one direction only.
Management should share the gains of the company with workers at the same
time workers must contribute to their best level. Taylor feels that prosperity of
organisation depends upon prosperity of employer as well as employees.
Japanese work culture is a classic example of such a situation. In Japanese
companies, paternalistic style of management is in practice. There is complete
openness between the management and workers. If at all workers go to strike
they wear a black badge but work more than normal working hours to gain the
sympathy of the management.

3. Cooperation not individualism: this principle is the extension of the


harmony not discord. According to this principle work must be carried on in
co-operation with each other, with mutual confidence and understanding of
each other. The management must take workers in confidence before setting
up the standard task for them. To have cooperation management should
welcome good suggestions of employees and they should be rewarded for their
suggestion. At the same time workers should not go on strike and make
unreasonable demands. There must be open communication system. According
to Taylor, there should be an almost equal division of work and responsibility
between workers and management. All the daylong the management should
work almost side by side with workers helping, encouraging and smoothing the
way for them.

4. Development of workers to their greatest efficiency and prosperity:


Industrial efficiency depends upon the efficiency of workers. Workers efficiency
depends upon proper training and their selection. Taylor insisted due care
should be taken while selecting the employees and after selecting they must be
given job according to their knowledge. This will ensure greatest efficiency and
prosperity for both company and workers.

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Scientific techniques of Taylor: Along with scientific principles Taylor developed


some scientific techniques by conducting various experiments at his work place.

1. Functional foremanship: In this technique Taylor suggested the division of


factory in two departments: planning department and production department
as Taylor felt that workers must be free from the burden of planning and they
must concentrate on work and production. To develop specialization in the
productivity, Taylor suggested under each department there must be some
functional experts to supervise, guide and instruct the worker. As one foreman
cannot be expert in every aspect of work so Taylor stressed on minimum eight
specialists or functional experts to supervise and give orders to workers. Each
boss will be specialized in one aspect of work and while observing and
instructing the worker there will be definitely specialization. So this technique
is the extension of principle of division of labour. Taylor said foreman must be
intelligent, educated, energetic, honest, specialized or profession expert. All
these qualities cannot be found in one person so Taylor stressed on having
minimum eight experts, four under each department to order and guide the
workers.

The eight functional experts suggested by Taylor are:

Under planning department:


1. Route clerk: this foreman is responsible to fix up the sequence of
steps for performing mechanical or manual job.
2. Instruction card clerk: this foreman is responsible for giving general
instructions necessary to carry on the job in specified manner.
3. Time and cost clerk: this foreman is responsible to fix up the time
for starting and completion of job. He also prepares the cost sheet for
every job.
4. Disciplinarian: this foreman is responsible for performance of job in
orderly and systematic manner.

Under operational department:

1. Gang boss: he arranges all the machines, tools and other resources
required for performance of the job so that there is no delay.
2. Speed boss: this foreman assures timely completion of job.
3. Repair boss: this boss ensures that machines and tools are kept in
working conditions.
4. Inspector: this boss keeps a check on quality control of the output.

Taylor emphasized that when every foreman instructs and orders, the worker’s
efficiency will improve.

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FACTORY MANAGER

PLANNING PRODUCTION
INCHARGE INCHARGE

ROUTE INSTRUCTION TIME AND REPAIR


DISCIPLINARIAN GANG BOSS SPEED BOSS INSPECTOR
CLERK CARD CLERK COST CLERK BOSS

WORKERS

2. Standardization and simplification of work: Scientific management always


emphasizes on maintaining standards relating to every step of business
operation. Standardization of output is possible if standard is maintained right
from selection of tools, equipment and machine to use, maximize the output by
keeping in mind the quality standards. Standardization does not mean only
quality standard but it refers to setting up standards for size, type, weights,
measures and quality of products.
According to Taylor scientific methods of production must be selected to
develop standards. To set up standard the managers must make use of work
study technique which includes time study, motion study and fatigue study.
Even modern techniques such as Kaizen, six sigma, etc. can be used to set up
standards. Companies like Nokia, Apple, Videocon, etc. are using techniques of
standardization.
The objectives of standardization are:
 To reduce a given line of product to fixed type, size and characteristics.
 To establish interchange ability of manufactured parts and products.
 To establish standards of excellence and quality in materials.
 To establish standards of performance of men and machines.

Simplification emphasizes on elimination of unnecessary diversity of


products, size and types: as more varieties mean more inventory, more
types of machinery, more labour cost etc.; by simplifying the task there can
be economy in use of machine, labour, inventory maintenance, etc. It will
also help in improving the quality and reduction of cost.

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3. Work study: it ensures maximum production at minimum cost and getting


best contribution from every factor. It include:
(a) Fatigue study: this technique of scientific management is conducted to find
out the frequency, duration and number of rest intervals. A person is bound
to get tired when he is performing a job for long period of time. There is
always a need for rest interval. Taylor suggested that the time period and
frequency of rest interval should not be decided by the wish and experience
of manager but to give a scientific approach, fatigue study must be
conducted. To conduct fatigue study Taylor suggested observing an average
worker when he is performing a job and noting down the time when that
worker starts getting tired and when his efficiency level starts decreasing,
then give him break. The time can be noted to decide frequency of rest
interval and during break after how much time the worker became fresh to
rejoin the work can be the time for rest interval. So if frequency and time for
rest interval is fixed by observing workers definitely it will be more scientific.
(b) Method study: the method study technique of scientific management is
conducted to find out the one best method or way of performing the job
which keeps production cost minimum and makes maximum use of
resources of the organisation. Taylor suggested that method of production
should not be decided by rule of thumb method but all the methods must be
tried in the organisation and the one which brings maximum benefits with
minimum cost must be selected.
To determine the best way there are certain parameters right from
procurement of raw materials till the final product is delivered. The objective
of method study is to minimize the cost of production and maximize the
quality and customer satisfaction. Ford motors used this concept very
successfully.
(c) Time study: the technique of time study is conducted to determine the
standard time required to perform a job. Time measuring devices are used
for each element of task. The standard time is fixed for the whole of the task
by making several readings. The method of time study will depend upon
volume and frequency of task, the cycle time of the operation and time
measurement costs. The objective of time study is to determine the number
of workers to be employed; frame suitable incentive schemes and determine
labour costs.
(d) Motion study: Motion Study refers to the study of movements like lifting,
putting objects, sitting and changing positions etc. which are undertaken
while doing a typical job. Unnecessary movements are sought to be
eliminated so that it takes less time to complete the job efficiently. Taylor
and his associate Frank Gailberth were able to reduce motions in brick
layering from 18 to just 5. Taylor demonstrated increase in productivity by
four times by this process.

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4. Differential piece wage system: the scientific technique of differential piece


rate system emphasizes on paying different rate of wage for efficient and
inefficient employees. This technique is a strongest motivator for employees to
perform efficiently. To conduct differential wage system Taylor suggested that
the company must fix a standard rate of wage for workers producing standard
output or their target. The workers who produce more than the standard must
be paid with a higher rate of wage and those who are producing less than
standard must be paid with a rate less than standard rate.
The technique of differential wage rate system insists on:
 Paying different rate of wage to efficient and inefficient employees.
 Extra wages paid to efficient employees will motivate them to
remain efficient.
 Extra wages paid to efficient employees will motivate inefficient
employees to come in the category of efficient employees.
 When payment is given according to number of units produced
automatically the production will be maximized.

For example: standard task is 10 units. Rates are: Rs. 50 per unit
for producing 10 units or more and Rs. 40 per unit for producing
less than 10 units.
Worker A produces 11 units; he gets Rs. 550 (11*50)
Worker B produces 9 units; he gets Rs. 360(9*40)
The difference of Rs. 190 will motivate B to perform better.

5. Mental revolution: Taylor said that generally in every organisation workers


feel that management exploits them, overburdens them with excess work and
pays them less; on the other hand, management feels that workers always
grumble, they follow go slow policy, damage the equipment and work
carelessly. Both the groups suspect each other. in this technique of mental
revolution Taylor suggested that there is need to change the attitude of both
the groups drastically. He referred to change as a revolution of mind to develop
positive thinking and feeling of cooperation for each other.

The objectives of mental revolution are:


 Change in mental attitudes of workers and management towards
each other.
 Co-operation between workers and management.
 Ruling out feeling of suspicion or prejudice from the minds of
workers and management to adapt systematic thinking.

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Advantages of scientific management:

1. Improves efficiency of business through simplification and specification.


2. Helps in reducing cost of production by eliminating all types of wastages.
3. Due to decrease in price firm is enabling to capture bigger share in the market.
4. Mutual understanding and cooperation bring workers and management closer.
5. More training to improve the skill of workers.
6. Enable the workers to earn more with the introduction of differential piece
wage system.

Modern scientific techniques:

1. Operations research: it was developed during 2nd world war to optimize the
development of war.

2. Lean manufacturing: this technique focuses on reducing seven wastes of


overproduction, i.e., waiting time, transportation, processing, motion,
inventory, scrap and any manufacturing process.

3. Kaizen: it is a Japanese word which means change for better. It is a daily


activity which eliminates hard and difficult task by experimenting scientific
methods.

4. Six sigma: it refers to improving efficiency by reducing quality variations.

5. Just in time manufacturing: it is an inventory management strategy to


improve return and reduce cost.

DIFFERENCE BETWEEN TIME STUDY AND MOTION STUDY:

BASIS TIME STUDY MOTION STUDY


1. Meaning It is conducted to find out the It is conducted to find out total
standard time for performing a movements of workers while they are
task. performing the task.
2.Purpose The purpose is to find out The purpose is to eliminate the
standard time to fix a fair day’s wasteful and unproductive
work for the workers. movements of workers to increase
their efficiency level.
3.Method of It is conducted with the help of It is conducted with the help of a
conducting stop watch. movie camera which keeps eye on
workers movements.

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SIMILARITIES BETWEEN TAYLOR AND FAYOL’S PRINCIPLES:

1. The main aim of both principles is maximizing the efficiency.


2. Both insist on cooperation between employees and employers.
3. Both give more importance to organizational interest over the individual interest.
4. Both suggested division of work for specialization.
5. The principles of both are used as basis for research in the field of management
studies.

COMPARISON BETWEEN TAYLOR AND FAYOL:

POINT OF TAYLOR FAYOL


DIFFERENCE
1.Concern Taylor’s techniques and Fayol’s principles are
principles are concerned with concerned with management
worker’s efficiency. efficiency.
2.Level/perspective Taylor’s started his studies and Fayol’s started his studies
approach from lowest level in and approach from the
the organisation. highest level in the
organisation.
3.Emphasis Taylor laid great emphasis on Fayol laid great emphasis on
standardization of work. functions of managers.
4.Focus Taylor laid focus on eliminating Fayol’s focus was on
wasteful movements and saving development of principles for
energy of workers. It forces on better management. it focuses
increase in productivity. on improving overall
achievement.
5.Major contribution Taylor’s main contribution was Fayol’s main contribution was
development of scientific development of fourteen
techniques and scientific principles of general;
principles. management.
6.Personality Taylor developed a personality Fayol developed the
of scientist and became famous personality of a researcher
as father of scientific and practitioner. He became
management. famous as father of general
management.
7.Unity of command Did not follow this principle as Strictly followed this principle,
Taylor insisted on minimum 8 i.e., only one boss for one
bosses. employee.
8.Expression Taylor’s techniques are Fayol’s techniques are
expressed as scientific expressed as general theory of
management. administration.
9.Applicability Applicable to specialized Applicable universally.
situation.

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