Management is one or
the other form has existed in every nook and corner of the world since the dawn
of civilization. Modern Management has grown with the growth of
social-economics and scientific institution. Modern view consists that a worker
does not work for only money. They work for their satisfaction and happiness
with good living style. Here Non- financial award is most important factor.
Modern management
theories started after 1950s. Modern management theory focuses the development
of each factor of workers and organization. Modern management theory refers to
emphasizing the use of systematic mathematical techniques in the system with
analyzing and understanding the inter-relationship of management and workers in
all aspect.
It has following
three Streams-
- Quantitative Approach
- System Approach
- Contingency Approach
Fayol’s Principles of Management
In the development of
classical school of management thought, Fayol’s administrative theory provides
an important link. While Taylor succeeded in revolutionising the working of
factory shop-floor in terms of devising the best method, fair day’s work,
differential piece-rate system and functional foremanship; Henri Fayol explained
what amounts to a managers work and what principles should be followed in doing
this work. If workers’ efficiency mattered in the factory system, so does the
managerial efficiency.
Fayol’s contribution must be interpreted in
terms of the impact that his writings had and continue to have improvement in
managerial efficiencies. Henri Fayol (1841-1925) was a French management
theorist whose theories concerning scientific organisation of labour were
widely influential in the beginning of twentieth century. He graduated from the
mining academy of St. Etienne in 1860 in mining engineering. The 19 year old
engineer started at the mining company ‘Compagnie de
commentary-FourchambeanDecazeville, ultimately acting as its managing director
from 1888 to 1918.
His theories deal with
organisation of production in the context of a competitive enterprise that has
to control its production costs. Fayol was the first to identify four functions
of management – Planning, Organising, Directing and Controlling although his
version was a bit different – Plan, Organise, Command, Coordinate and Control.
According to Fayol, all activities of an industrial undertaking could be
divided into: Technical; Commercial; Financial; Security; Accounting and
Managerial. He also suggested that qualities a manager must possess should be —
Physical, Moral, Education, Knowledge and experience. He believed that the
number of management principles that might help to improve an organisation’s
operation is potentially limitless.
Based largely on his
own experience, he developed his concept of administration. The 14 principles
of management propounded by him were discussed in detail in his book published
in 1917, ‘Administration industrielle et generale’. It was published in English
as ‘General and Industrial Management’ in 1949 and is widely considered a
foundational work in classical management theory.
For his contribution he
is also known as the ‘Father of General Management’.
The 14 principles of management given by him
are:
(i) Division of Work:
Work is divided into small tasks/jobs. A trained specialist who is competent is
required to perform each job. Thus, division of work leads to specialization.
According to Fayol, “The intent of division of work is to produce more and
better work for the same effort. Specialization is the most efficient way to
use human effort.” In business work can be performed more efficiently if it is
divided into specialized tasks; each performed by a specialist or trained
employee. This results in efficient and effective output. Thus, in a company we
have separate departments for finance, marketing, production and human resource
development etc. All of them have specialised persons. Collectively they
achieve production and sales targets of the company. Fayol applies this
principle of division of work to all kinds of work – technical as well as
managerial. You can observe this principle at work in any organisation like
hospital or even a government office.
(ii) Authority and
Responsibility: According to Fayol, “Authority is the
right to give orders and obtain obedience, and responsibility is the corollary
of authority. The two types of authority are official authority, which is the
authority to command, and personal authority which is the authority of the
individual manager.” Authority is both formal and informal. Managers require
authority commensurate with their responsibility. There should be a balance between
authority and responsibility. An organisation should build safeguards against
abuse of managerial power. At the same time a manager should have necessary
authority to carry out his responsibility. For example, a sales manager has to
negotiate a deal with a buyer. She finds that if she can offer credit period of
60 days she is likely to clinch the deal which is supposed to fetch the company
net margin of say Rs. 50 crores. Now the company gives power to the manager to
offer a credit period of only 40 days. This shows that there is an imbalance in
authority and responsibility. In this case the manager should be granted
authority of offering credit period of 60 days in the interest of the company.
Similarly, in this example this manager should not be given a power to offer a
credit period of say 100 days because it is not required. A manager should have
the right to punish a subordinate for wilfully not obeying a legitimate order
but only after sufficient opportunity has been given to a subordinate for
presenting her/his case.
(iii) Discipline:
Discipline is the obedience to organisational rules and employment agreement
which are necessary for the working of the organisation. According to Fayol,
discipline requires good superiors at all levels, clear and fair agreements and
judicious application of penalties. Suppose management and labour union have
entered into an agreement whereby workers have agreed to put in extra hours
without any additional payment to revive the company out of loss. In return the
management has promised to increase wages of the workers when this mission is
accomplished. Here discipline when applied would mean that the workers and
management both honour their commitments without any prejudice towards one
another.
(iv) Unity of Command:
According to Fayol there should be one and only one boss for every individual
employee. If an employee gets orders from two superiors at the same time the
principle of unity of command is violated. The principle of unity of command
states that each participant in a formal organisation should receive orders
from and be responsible to only one superior. Fayol gave a lot of importance to
this principle. He felt that if this principle is violated “authority is
undermined, discipline is in jeopardy, order disturbed and stability
threatened”. The principle resembles military organisation. Dual subordination
should be avoided. This is to prevent confusion regarding tasks to be done.
Suppose a sales person is asked to clinch a deal with a buyer and is allowed to
give 10% discount by the marketing manager. But finance department tells
her/him not to offer more than 5% discount. Now there is no unity of command.
This can be avoided if there is coordination between various departments.
(v) Unity of Direction:
All
the units of an organisation should be moving towards the same objectives
through coordinated and focussed efforts. Each group of activities having the
same objective must have one head and one plan. This ensures unity of action
and coordination. For example, if a company is manufacturing motorcycles as
well as cars then it should have two separate divisions for both of them. Each
division should have its own incharge, plans and execution resources. On no
account should the working of two divisions overlap. Now let us differentiate
between the two principles of unity of command and unity of direction.
(vi) Subordination of
Individual Interest to General Interest: The interests of an
organisation should take priority over the interests of any one individual
employee according to Fayol. Every worker has some individual interest for
working in a company. The company has got its own objectives. For example, the
company would want to get maximum output from its employees at a competitive
cost (salary). On the other hand, an employee may want to get maximum salary
while working the least. In another situation an individual employee may demand
some concession, which is not admissible to any other employee like working for
less time. In all the situations the interests of the group/company will
supersede the interest of any one individual. This is so because larger
interests of the workers and stakeholders are more important than the interest
of any one person. For example, interests of various stakeholders i.e., owners,
shareholders, creditors, debtors, financers, tax authorities, customers and the
society at large cannot be sacrificed for one individual or a small group of
individuals who want to exert pressure on the company. A manager can ensure
this by her/his exemplary behaviour. For example, she/he should not fall into
temptation of misusing her/his powers for individual/ family benefit at the
cost of larger general interest of the workers/ company. This will raise
her/his stature in the eyes of the workers and at the same time ensure same
behaviour by them.
(vii) Remuneration of
Employees: The overall pay and compensation should be fair to
both employees and the organisation. The employees should be paid fair wages,
which should give them at least a reasonable standard of living. At the same
time it should be within the paying capacity of the company. In other words,
remuneration should be just and equitable. This will ensure congenial
atmosphere and good relations between workers and management. Consequently, the
working of the company would be smooth.
(viii)Centralisation
and Decentralisation: The concentration of decision-making
authority is called centralisation whereas its dispersal among more than one
person is known as decentralisation. According to Fayol, “There is a need to
balance subordinate involvement through decentralisation with managers’
retention of final authority through centralisation.” The degree of
centralisation will depend upon the circumstances in which the company is
working. In general large organisations have more decentralisation than small
organisations. For example, panchayats in our country have been given more
powers to decide and spend funds granted to them by the government for the
welfare of villages. This is decentralisation at the national level.
(ix) Scalar Chain:
An organisation consists of superiors and subordinates. The formal lines of
authority from highest to lowest ranks are known as scalar chain. According to
Fayol, “Organisations should have a chain of authority and communication that
runs from top to bottom and should be followed by managers and the
subordinates.” Let us consider a situation where there is one head ‘A’ who has
two lines of authority under her/ him. One line consists of B-CD-E-F. Another
line of authority under ‘A’ is L-M-N-O-P. If ‘E’ has to communicate with ‘O’
who is at the same level of authority then she/he has to traverse the route
E-D-C-B-A-L-M-N-O. This is due to the principle of scalar chain being followed
in this situation. According to Fayol, this chain should not be violated in the
normal course of formal communication. However, if there is an emergency then
‘E’ can directly contact ‘O’ through ‘Gang Plank’ as shown in the diagram. This
is a shorter route and has been provided so that communication is not delayed.
In practice you find that a worker cannot directly contact the CEO of the
company. If at all she/he has to, then all the formal levels i.e., foreman,
superintendent, manager, director etc have to know about the matter. However,
in an emergency it can be possible that a worker can contact CEO directly.
(ix) Scalar Chain:
An organisation consists of superiors and subordinates. The formal lines of
authority from highest to lowest ranks are known as scalar chain. According to
Fayol, “Organisations should have a chain of authority and communication that
runs from top to bottom and should be followed by managers and the
subordinates.” Let us consider a situation where there is one head ‘A’ who has
two lines of authority under her/ him. One line consists of B-CD-E-F. Another
line of authority under ‘A’ is L-M-N-O-P. If ‘E’ has to communicate with ‘O’
who is at the same level of authority then she/he has to traverse the route
E-D-C-B-A-L-M-N-O. This is due to the principle of scalar chain being followed
in this situation. According to Fayol, this chain should not be violated in the
normal course of formal communication. However, if there is an emergency then
‘E’ can directly contact ‘O’ through ‘Gang Plank’ as shown in the diagram. This
is a shorter route and has been provided so that communication is not delayed.
In practice you find that a worker cannot directly contact the CEO of the
company. If at all she/he has to, then all the formal levels i.e., foreman,
superintendent, manager, director etc have to know about the matter. However,
in an emergency it can be possible that a worker can contact CEO directly.
(x) Order:
According to Fayol, “People and materials must be in suitable places at
appropriate time for maximum efficiency.” The principle of order states that ‘A
place for everything (everyone) and everything (everyone) in its (her/his)
place’. Essentially it means orderliness. If there is a fixed place for
everything and it is present there, then there will be no hindrance in the
activities of business/ factory. This will lead to increased productivity and
efficiency.
(xi) Equity:
Good sense and experience are needed to ensure fairness to all employees, who
should be treated as fairly as possible,” according to Fayol. This principle
emphasises kindliness and justice in the behaviour of managers towards workers.
This will ensure loyalty and devotion. Fayol does not rule out use of force
sometimes. Rather he says that lazy personnel should be dealt with sternly to send
the message that everyone is equal in the eyes of the management. There should
be no discrimination against anyone on account of sex, religion, language,
caste, belief or nationality etc. In practice we can observe that now a days in
multinational corporations people of various nationalities work together in a
discrimination free environment. Equal opportunities are available for everyone
in such companies to rise. Thus, we find Indiaborn CEO’s such as Rajat Gupta who
heads multinational like Mckinsey Inc. Lately India-born American Arun Sarin
has become CEO of Vodaphone limited, a British telecom major.
(xii) Stability of
Personnel: “Employee turnover should be minimised to maintain
organisational efficiency”, according to Fayol. Personnel should be selected
and appointed after due and rigorous procedure. But once selected they should
be kept at their post/ position for a minimum fixed tenure. They should have
stability of tenure. They should be given reasonable time to show results. Any
adhocism in this regard will create instability/insecurity among employees.
They would tend to leave the organisation. Recruitment, selection and training
cost will be high. So stability in tenure of personnel is good for the business.
(xiii)Initative:
Workers should be encouraged to develop and carry out their plans for
improvements according to Fayol. Initiative means taking the first step with
self-motivation. It is thinking out and executing the plan. It is one of the
traits of an intelligent person. Initiative should be encouraged. But it does
not mean going against the established practices of the company for the sake of
being different. A good company should have an employee suggestion system
whereby initiative/ suggestions which result in substantial cost/time reduction
should be rewarded.
(xiv) Espirit De Corps:
Management should promote a team spirit of unity and harmony among employees,
according to Fayol. Management should promote teamwork especially in large organisations
because otherwise objectives would be difficult to realise. It will also result
in a loss of coordination. A manager should replace ‘I’ with ‘We’ in all his
conversations with workers to foster team spirit. This will give rise to a
spirit of mutual trust and belongingness among team members. It will also
minimise the need for using penalties.
From the foregoing
discussion it is clear that Fayol’s 14 principles of management are widely
applicable to managerial problems and have cast a profound impact on management
thinking today. But with the change of environment in which business is done,
the interpretation of these principles has changed. For example, authority and
responsibility meant empowering of managers but now it means empowerment of employees
because of flat organisational structures that are gaining ground. We are now
in a position to understand the current connotations of Fayol’s principles
discussed in the accompanying box.
