P.P.

SAVANI CHAITANYA VIDYA SANKUL, CBSE

Ch.2 PRINCIPLES OF MANAGEMENT (NOTES)

SUBJECT: - Business Studies (054) STD: - 12th

INTRODUCTION
Many business enterprises have followed various principles in their working over a period of time.
Like APPLE, SAMSUNG, TATA, MAHINDRA, TOYOTA, HONDA

A number of management THINKERS, and WRITERS have also studied principles of management from time-to-
time.

Management principles have evolved and are in the continuous process of evolution.
You can see that the evolution of management thought has been very fascinating.
In this chapter we will study the contributions of
1. Fredrick Winslow Taylor - American mechanical engineer ‘Scientific Management’ and
2. Henri Fayol - French mining engineer ‘Administrative Principles’
Who as you have read are associated with the Classical Management Theory.

Both of them contributed immensely towards the study of management as a discipline.

Principles of Management:
A managerial principle is a BROAD and GENERAL GUIDELINE for DECISIONMAKING and behaviour.
For example while deciding about PROMOTION of an employee
- One manager may consider SENIORITY,
- Whereas the other may follow the principle of MERIT.
One may distinguish principles of management from those of pure science.

Management principles are not as rigid as principles of pure science.

They deal with human behaviour and, thus, are to be applied creatively given the demands of the situation.
Technology and Human behaviour are never static and both are affecting business.
Hence all the principles have to keep pace with these changes.
For example,
- In the absence of Information and Communications Technology (ICT), a manager could oversee only a
small work force that too within a narrow geographical space.
- The advent of ICT has expanded the capability of the managers to preside over large business empires
spread across the globe.
- Infosys headquarters in Bangalore boast of the Asia’s largest flat screen in their conference room from
where their managers can interact with their employees and customers in all parts of the world.
What are NOT principles of Management

Techniques Principles Of Management

- Procedures OR Methods,
Principles are guidelines to take decisions or actions
- Which involve a series of steps to be taken to while practicing techniques.
accomplish desired goals.

Values Principles Of Management

Values are something, which are Acceptable OR Principles are basic truths or guidelines for
Desirable. behaviour.

They have moral connotations. Principle of management are formed after research in
work situations,

Values are general rules for behaviour of individuals Which are technical in nature.
in society formed through common practice

Remember
- While practicing principles of management values cannot be neglected,
- Businesses have to fulfil social and ethical responsibilities towards society.

Nature of Principles of Management (Qualities OR Characteristics OR Features)

- Principles are general propositions, which are applicable when certain conditions are present.
- These have been developed on the basis of Observation and Experimentation as well as Personal
Experiences of the managers.
- Depending upon how they are derived and how effective they are in explaining and predicting managerial
behaviour, they contribute towards the development of management both as a science and as an art.
- Derivation of these principles may be said to be a matter of SCIENCE and their creative application may
be regarded as AN ART.
- These principles lend credibility of a Learnable and Teachable discipline to the practice of management.
- Now reaching to high managerial position may not be a matter of birth, but a matter of requisite
qualifications.
- Management principles have gained importance with Increasing Professionalization of management.
- These principles are guidelines to action.
- They denote a cause and effect relationship.
- Functions of management viz., Planning, Organising, Staffing, Directing and Controlling are the Actions to
be taken while practising management,
- Principles help managers to take decisions while performing these functions.
The following points summarise the nature of principles of management.
1. Universal applicability:
- The principles of management are intended to apply to all types of organisations,
1. Business/Non-Business,
2. Small/Large,
3. Public Sector/Private Sector,
4. Manufacturing/Services Sectors.
- The extent of their applicability would vary with
1. The nature of the organisation,
2. Business activity,
3. Scale of operations
- For example, for greater productivity,
1. Work should be divided into small tasks and each employee should be trained to perform
his/her specialised job.
2. This principle is applicable to a Government Office / Limited Company (Departments)
2. General guidelines:
- The principles are guidelines to action but do not provide readymade solutions to all managerial
problems.
- This is so because real business situations are very complex and dynamic and are a result of many
factors.
- However, the importance of principles cannot be underestimated because even a small guideline
helps to solve a given problem.
- For example, in dealing with a situation of conflict between two departments, a manager may
emphasise the primacy of the overall goals of the organisation.
3. Formed by practice and experimentation:
- The principles of management are formed By Experience and collective Wisdom of managers as well
as Experimentation.
- For example, it is a matter of common experience that Discipline is indispensable for accomplishing
any purpose. This principle finds mention in management theory.
- On the other hand, in order to remedy the problem of fatigue of workers in the factory, an experiment
may be conducted to see the effect of improvement of physical conditions to reduce stress.
4. Flexibile:
- The principles of management are not rigid prescriptions, which have to be followed absolutely.
- They are flexible and can be MODIFIED by the manager when the situation so demands.
- They give the manager enough discretion to do so.
- For example, the degree of concentration of authority (centralisation) or its dispersal (decentralisation)
will depend upon the situations and circumstances of each enterprise.
- Individual principles are like different tools serving different purposes,
- The manager has to decide which tool to use under what circumstances.
5. Mainly behavioural:
- Management principles aim at influencing behaviour of human beings.
 - Therefore, principles of management are mainly behavioural in nature.
- It is do not that these principles do not have any relation to things and situations at all, it is just a
matter of emphasis.
- Principles enable a better understanding of the relationship between human and material resources
in accomplishing organisational purposes.
- For example, while planning the layout of a factory, ORDERLINESS would require that workflows are
matched by flow of materials and movement of men.
6. Cause and effect relationships:
- The principles of management establish the relationship between cause and effect. so that they can be
used in similar situations in a large number of cases.
- They tell us if a particular principle was applied in a particular situation, what would be its likely effect.
- The principles of management are less than perfect since they mainly apply to human behaviour.
- In real life, situations are not identical. So, accurate cause and effect relationships may be difficult to
establish.
- However, principles of management assist managers in establishing these relationships to some extent
and are therefore useful.
- In situations of emergencies,
1. It is desirable that someone takes charge and others just follow.
2. But in situations requiring cross-functional expertise,
1. Setting up of a NEW FACTORY,
2. More PARTICIPATIVE APPROACH to decision-making would be advisable.
7. Contingent:
- The application of principles of management is contingent means dependent upon the prevailing
situation at a particular point of time.
- The application of principles has to be changed as per requirements.
- For example, employees deserve Fair and Just Remuneration.
1. But what is just and fair is determined By Multiple Factors. They include
1. Contribution of the employee,
2. Paying capacity of the employer and also
3. Prevailing wage rate for the occupation under consideration.
Significance of Principles of Management

- The principles of management derive their significance from their UTILITY.

- They provide useful insights to managerial behaviour and influence managerial practices.
- Managers may apply these principles to fulfil their tasks and responsibilities.
- Principles GUIDE managers in Taking and Implementing decisions.
- Everything worthwhile is governed by an underlying principle.
- Management Scholars are trying to find these underlying principles with a view to using these under
repetitive circumstances.

The significance of principles of management can be discussed in terms of the following points:
1. Providing managers with useful insights into reality:
- The principles of management provide the managers the useful insights for understanding of real
world situations.
- Management principles increase
1. Knowledge,
2. Ability and
3. Understanding of Managers
- It will also enable managers to learn from past mistakes and
- Save time by solving recurring problems quickly.
- Management principles increase managerial efficiency.
- For example, a manager can
1. Leave routine decision-making to his subordinates and
2. Deal with exceptional situations which require his expertise by following the principles of
delegation.
2. Optimum utilisation of resources and effective administration:
- Resources both Human and Material available with the company are LIMITED.
- By optimum use we mean take Maximum Benefit With Minimum Cost.
- Principles HELP the managers to Foresee the cause and effect relationships of their decisions and
actions. So the wastages associated with a trial-and-error approach can be overcome.
- Effective administration necessitates impersonalisation of managerial conduct so that managerial
power is used with due discretion.
- Principles of management limit the boundary of managerial discretion so that their decisions may be
free from personal prejudices and biases.
- For example, in deciding the annual budgets for different departments, managerial discretion is
bounded by the principle of contribution to organisational objectives, rather than personal
preferences,
3. Scientific decisions:
- Decisions must be based on
1. Facts,
2. Thoughtful and
3. Justifiable in terms of the intended purposes.
- They must be
1. Timely,
2. Realistic and
3. Subject To measurement and evaluation.
- Management principles help in thoughtful decision-making. Based on LOGIC rather than blind faith.
- Management decisions are free from bias and prejudice here.
- They are based on the objective assessment of the situation.
4. Meeting changing environment requirements:
 - Principles of Management are in form of General Guidelines but they are MODIFIED and this help
managers to meet changing requirements of the environment.
- Management principles are FLEXIBLE to adapt to dynamic business environment.
- For example, management principles emphasise Division Of Work and specialisation.
- In modern times this principle has been extended to the entire business whereby companies are
specialising in their core competency and divesting non-core businesses.
- Some companies are outsourcing their non-core activities like
1. Share-transfer management and
2. Advertising to outside agencies.
- Even core processes such as
1. R&D,
2. Manufacturing and
3. Marketing are being outsourced today.
4. ‘Business Process Outsourcing’ (BPO) and
5. ‘Knowledge Process Outsourcing’ (KPO)?
5. Fulfilling social responsibility:
- The increased awareness of the public, forces businesses especially limited companies to fulfill their
social responsibilities.
- Management theory and management principles have also evolved in response to these demands.
Moreover, the interpretation of the principles also assumes newer and contemporary meanings with
the change in time.
- So, if one were to talk of ‘EQUITY’ today,
1. Similar wages
2. Value to the customer,
3. Care for the environment,
4. Dealings with business associates would all come under the purview of this principle.
- Many Public Sector Undertakings have developed entire townships as, for example,
1. BHEL has developed Ranipur in Hardwar (Uttaranchal).
6. Management training, education and research:
- Principles of management are at the core of management theory.
- As such these are used as a basis for management Training, Education and Research.
- Many management institutes are conducting management Aptitude Tests for admission.
- These principles provide basic groundwork for the development of management as a discipline.
- Professional courses such as MBA (Master of Business Administration), BBA (Bachelor of Business
Administration) also teach these principles as part of their curriculum at the beginner’s level.
- These principles enable refinement of management practices as well by facilitating the development of
new management techniques.
1. Operations Research (OR) – Analytical method of problem solving
2. Cost accounting – assigning cost to cost objects
3. ‘Just in Time’ – Goods are received when they required
 4. ‘Kanban’ – Inventory control system
5. ‘Kaizen’ – Approach to creating continuous improvement.
6. Have developed due to further research on these principles.

F.W. Taylor’s Scientific Management

- Fedrick Winslow Taylor (March 20,1856 – March 21, 1915)
- American Mechanical Engineer
- Father of Scientific Management
- Belongs to Classical Theory of Mgt.
- Era of Industrial Revolution
- Focusing on
 Industrial Efficiency
 Factory System Production
- Emphasis on Scientific Analysis of work
- Believes it is possible to find best way to do it.
- Timeline
1874 Started career as Apprentice

1878 Join as labour Midvale steel

1883 Degree of Mechanical Engineer

1890-1893 General Manager – Manufacturing, Investment Company

1893 Consulting

1895 First Paper – A Piece Rate System

1906 Doctor of Science – Patents Developed, Medals, Awards

1911 ASME – President

1915 Died - pneumonia

Principles of Scientific Management In the earlier days of the Industrial Revolution, in the absence of an
established theory of factory organisation, factory owners or managers relied on Personal Judgment in
attending to the problems they confronted in the course of managing their work. This is what is referred to
as ‘rule of thumb’.
There was a need to follow an approach that was based on the method of science
- Defining A Problem,
- Developing Alternative Solutions,
- Anticipating Consequences,
- Measuring Progress And
- Drawing Conclusions.
He proposed scientific management as opposed to rule of thumb.
He broke up human activity into small parts and found out how it could be done effectively, in less time
and with increased productivity.
It implies conducting Business Activities According
- To Standardised Tools, Methods and Trained Personnel in order
- To increase the OUTPUT, improve its QUALITY and reduce COSTS and WASTES.

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

PRINCIPLES OF SCIENTIFIC MANAGEMENT

1. Science not Rule of Thumb:
- Taylor pioneered the introduction of the method of scientific inquiry into the domain of management
practice.
- Taylor believed that there was only one best method to maximise efficiency. This method can be
developed through study and analysis.
- The method so developed should substitute ‘Rule of Thumb’ throughout the organisation.
- Scientific method involved investigation of traditional methods through
1. Work-study,
2. Unifying the best practices and
3. Developing a standard method,
4. Would be followed throughout the organisation
- According to Taylor, even a small production activity like loading pigs of iron into boxcars can be
scientifically planned and managed.
- This can result in tremendous saving of HUMAN ENERGY as well as WASTAGE of Time and Materials.
- The more sophisticated the processes, greater would be the savings.
- The use of Internet has brought about dramatic improvements in internal efficiencies and customer
satisfaction.
2. Harmony, Not Discord:
- In factory system MANAGERS served as a LINK between the OWNERS and the WORKERS.
- Managers are authorised to ‘get work done’ from the workers. So there is always chance of a class-
CONFLICT, The Mangers Vs. Workers.
- Taylor recognised that this conflict helped none,
1. The Workers,
2. The Managers Or
3. The Factory Owners.
- He emphasised that there should be COMPLETE HARMONY between the management and workers.
Both should realise that each one is important.
- To achieve this state, Taylor called for complete MENTAL REVOLUTION on the part of both
management and workers.
- It means that management and workers should transform their thinking.
1. Management should share the gains of the company
2. Workers should work hard
3. Both embrace change for the good of the company.
 4. Both should be part of the family.
- According to Taylor, ‘Scientific management has for its foundation the firm conviction that the true
interests of the two are one and the same;
1. Prosperity for the employer cannot exist for a long time unless
2. It is accompanied by prosperity for the employees and vice versa’.
- Japanese work culture is a classic example of such a situation.
1. In Japanese companies, paternalistic style of management is in practice.
2. There is complete openness between the management and workers.
3. 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 an EXTENSION of principle of ‘Harmony not discord’.
- There should be complete cooperation between the labour and the management instead of
individualism.
- Competition should be replaced by cooperation.
- Both should realise that they need each other.
- Management should not close its ears to any constructive suggestions made by the employees.
- They should be REWARDED for their suggestions which results in substantial reduction in costs.
- They should be part of management and, if any important decisions are taken, workers should be
taken into confidence.
- At the same time workers should desist from going on strike and making unreasonable demands on
the management.
- In fact when there will be open communication system and
- Paternalistic style of management, like Japanese companies.
- According to Taylor, there should be an almost equal division of work and responsibility between
workers and management.
- All the day long the management should work almost side by side with the workers
1. Helping,
2. Encouraging and
3. Smoothing the way for them.
4. Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity:
- Industrial efficiency depends to a large extent on WORKERS (personnel) competencies.
- Worker training was essential also to learn the ‘best method’ developed as a consequence of the
scientific approach.
- Taylor was of the view that the concern for efficiency could be built in right from the process of
employee selection.
- Each person should be scientifically selected. Then work assigned should suit her/his
1. Physical,
2. Mental and
3. Intellectual capabilities.
- To increase efficiency, they should be given the required training.
- Efficient employees would PRODUCE MORE and EARN MORE.
- This will ensure their greatest efficiency and prosperity for both company and workers.
Techniques of Scientific Management

These are based on the various experiments he conducted during his career.
1. Functional Foremanship

- In the factory system, the foreman represents the managerial figure with whom the workers are in
face-to-face contact on a daily basis.
- The foreman is the lowest ranking manager and the highest ranking worker. He is the pivot around
whom revolves the entire production planning, implementation and control.
- Taylor concentrated on improving the performance of this (foreman) role in the factory set-up.
- In fact, he identified a list of qualities of a good foreman/supervisor and found that no single person
could fit them all. Foremen should have
1. Intelligence, 5. Judgment,
2. Education, 6. Special Knowledge,
3. Tact, 7. Manual Dexterity (Skill) and Energy,
4. Grit - Calmness 8. Honesty and Good Health.
- This prompted him to suggest functional foremanship through 8 persons.
- Taylor advocated separation of planning and execution functions.
- This concept was extended to the lowest level of the shop floor. It was known as functional
foremanship.
- Under the factory manager there was a planning incharge and a production incharge.
1. Under PLANNING incharge four personnel namely
1. Instruction Card clerk - Draft instructions for the workers
2. Route clerk - Specify the route of production
3. Time and cost clerk - Prepare time and cost sheet
4. Disciplinarian - Ensure discipline respectively.
2. Under PRODUCTION incharge, personnel who would work were
1. Speed boss - Timely and accurate completion of job
2. Gang boss - Keeping machines and tools ready for operation by workers
3. Repair boss - Ensure proper working condition of machines and tools
4. Inspector - Check the quality of work
 - Functional foremanship is an extension of the principle of division of work and specialisation to the
shop floor.
- Each worker will have to take orders from these 8 foremen in the related process or function of
production.
- Each specialist is to be assigned work according to her/his qualities.
- For example, those with Technical Mastery, Intelligence and Grit may be given Planning Work.
- Those with Energy and Good Health may be assigned Execution Work.
2. Standardisation and Simplification of Work
- Standardisation refers to the process of setting standards for every business activity; it can be
1. Process, 5. Machinery,
2. Raw Material, 6. Methods Or
3. Time, 7. Working Conditions.
4. Product,
- These standards are the BENCHMARKS, which must be followed to during production.
- The objectives of standardisation are:
1. To reduce a given line or product to fixed types, sizes and characteristics.
2. To establish interchange ability of manufactured parts and products.
3. To establish standards of excellence and quality in materials.
4. To establish standards of performance of men and machines.
- Taylor was a great supporter of standardisation.
- According to him scientific method should be used to analyse methods of production prevalent under
the rule of thumb.
- The best practices can be kept and further refined to develop a standard which should be followed
throughout the organisation.
- This can be done through
- Work-Study Techniques = Time Study + Motion Study + Fatigue Study + Method Study
Simplification:

- It focus on ELIMINATING superfluous varieties, sizes and dimensions

- Simplification aims at eliminating unnecessary diversity of products.
- It results in savings of Cost of Labour, Machines and Tools.
- It
1. Reduced Inventories,
2. Fuller Utilisation Of Equipment and
3. Increasing Turnover.
- Most large companies like Nokia, Toyota and Microsoft, etc. have successfully implemented
standardisation and simplification.
3. Method Study
- The objective of method study is to find out one BEST WAY of doing the job.
- There are various methods of doing the job. To determine the best way there are several parameters.
Right from procurement of raw materials till the final product is delivered to the customer every
activity is part of method study.
- Taylor developed the concept of ASSEMBLY LINE by using method study.
 - Ford Motor Company used this concept very successfully.
- Even now auto companies are using it.
- The objective of the whole exercise is
1. To Minimise The Cost of Production and
2. Maximise The Quality and Satisfaction of the Customer.
- For this purpose many TECHNIQUES like Process Charts and Operations Research etc are used.
- For designing a car, the assembly line production would entail deciding
1. The sequence of operations,
2. Place for Men, Machines and Raw materials etc.
3. All this is part of method study.
4. Motion Study
- Motion study refers to the STUDY OF MOVEMENTS like Lifting, Putting Objects, Sitting and Changing
Positions, etc., While doing a typical job.
- Unnecessary movements are sought to be eliminated so that it takes less time to complete the job
efficiently.
- Taylor demonstrated that productivity increased to about four times by this process. On close
examination of body motions, for example, it is possible to find out:
1. Motions which are PRODUCTIVE
2. Motions which are INCIDENTAL (e.g., going to stores)
3. Motions which are UNPRODUCTIVE.
- For example, Taylor and his associate Frank Gailberth were able to reduce motions in brick layering
from 18 to just 5.
- Taylor used stopwatches and various symbols and colours to identify different motions.
- Through motion studies, Taylor was able to design suitable EQUIPMENT and TOOLS to educate
workers on their use.
- The results achieved by him were truly remarkable.
5. Time Study
- It determines the STANDARD TIME taken to perform a well-defined job.
- Time measuring DEVICES are used for each element of task.
- The standard time is fixed for the whole of the task by taking several readings.
- The method of time study will depend upon VOLUME and FREQUENCY of the 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.
- For example, For making cardboard box
-
Standard time 20 Minutes. Per Box

1 Hour 3 Boxes

8 Hours ( 1 Hour Rest) shift 21 Boxes

Standard Task A Worker

 - Wages can be decided accordingly.
6. Fatigue Study
- Fatigue study seeks to determine the amount and frequency of REST INTERVALS in completing a task.
A person is bound to feel tired physically and mentally if she/he does not rest while working.
- The rest intervals will help one to regain stamina and work again with the same capacity.
- This will result in increased productivity.
- In factories a worker has to be given some rest interval to take her/his lunch etc.
- If the work involves heavy manual labour then small pauses have to be frequently given to the worker
so that she/he can recharge her/his energy level for optimum contribution.
- There can be many causes for fatigue like
1. Long Working Hours,
2. Doing Unsuitable Work,
3. Having Uncordial Relations With The Boss
4. Bad Working Conditions Etc.
- Such hindrances in good performance should be removed.
7. Differential Piece Wage System
- Taylor was a strong advocate of piece wage system. He wanted to DIFFERENTIATE between EFFICIENT
and INEFFICIENT workers.
- The standard time and other parameters should be determined on the basis of the work-study.
- He wanted to REWARD efficient workers.
- So he introduced Different Rate Of Wage Payment For those who performed ABOVE STANDARD and
for those who performed BELOW STANDARD.
-
Standard Output 10 units per day

Rate for Standard and above Rs. 50 per unit

( Efficient Worker)
Rate for Below Standard Rs. 40 per unit
( Inefficient Worker)

Efficient Worker Inefficient Worker

Output – 11 Units 9 Units

Wages Rs. 550 (11 × 50) Rs.360 ( 9 × 40)

Difference Rs. 190 ( 550 – 360)

- According to Taylor, the difference of Rs. 190 should be enough for the inefficient worker to be
motivated to perform better.
- From his own experience, Taylor gives the example of a worker named Schmidt who was able to earn
60% more wages by using this technique.
- This differential system must be based on the premise that efficiency is the result of the joint efforts of
the managers and the workers.
 - The workers and managers should work in harmony for maximising the output rather than restricting
it.
- Clearly the sum and substance of Taylor’s ideas lies not in the disjointed description of principles and
techniques of scientific management, but in the change of the mindset, which he referred to as mental
revolution.
8. Mental revolution
- It involves a change in the attitude of workers and management towards one another from
competition to cooperation. Both should realise that they require one another. Both should aim to
increase the size of surplus.
- Management should share a part of surplus with workers.
- Workers should also contribute their might so that the company makes profits.
- This attitude will be good for both of them and also for the company. In the long run only worker’s
well-being will ensure prosperity of the business.
We can also examine the present status of scientific management.
- Today, many New Techniques have been developed as a sequel to scientific management.
1. Operations research was developed in the Second World War to optimise the deployment of
war material.
2. Assembly line was also discovered by F.W. Taylor, which was used very successfully by Ford
motor company for manufacturing ‘Model T’ car for the masses. This concept is much used
now.
3. The latest development in scientific management is ‘LEAN MANUFACTURING’.
4. Robotics and Computers are being used in production and other business activities.

Henry Fayol’s Principles of Management

- 1841 to 1925
- Explained
 How to manage work?
 Focusing on Manager’s Efficiency
- For his contribution he is also known as the ‘Father of General
Management’
- French Mining Engineering at age of 19 yrs
- 1888 -1918 Become Managing Director then Diretor till Death.
- First who identify the functions of Management
 Planning  Directing
 Organising  Controlling
- Industry could divided
 Technical  Security
 Commercial  Accounting
 Financial  Managerial
- Manager’s Qualities
 Physical  Moral
  Education  Experience
 Knowledge
- 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.
1. Division of Work:
- Work is divided into Small Tasks/ jobs.
- A Trained Specialist is required to perform each job.
- Division of work leads to specialisation.
- According to Fayol, “The intent of division of work is to produce more and better work for the same
effort. Specialisation is the most efficient way to use human effort.”
- In business work can be performed more efficiently if it is divided into specialised tasks; each
performed by a specialist or trained employee. This results in Efficient and Effective Output.
- For example companies have separate departments for
1. Finance,
2. Marketing,
3. Production
4. 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.
1. Hospital or even
2. Government office
3. School
4. Temple
2. Authority and Responsibility:
- According to Fayol, “Authority is the right to give orders and obtain obedience, and responsibility is
the result of authority.
- The two types of authority are
1. Official Authority - The authority to command, and
2. Personal Authority - The authority of the individual manager.”
- Authority is both Formal and Informal.
- Managers require authority as well as 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,
Sales Manager Allowed credit period 40 days
 Customer demanding 60 days
Deal amount 50 Crore
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.
3. 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
1. Good Superiors At All Levels,
2. Clear and Fair Agreements and
3. Judicious Application Of Penalties.
- For Example 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.
4. 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.
- Dual subordination should be avoided. This is to PREVENT CONFUSION regarding tasks to be done.
- 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
1. Authority Is Undermined,
2. Discipline Is In Jeopardy,
3. Order Disturbed And
4. Stability Threatened
- The principle resembles MILITARY organisation.
- Suppose a Salesman get Instructions from two Persons
 Marketing Manager – 10% Discount
 Finance Manager – 5% Discount
- Now there is no unity of command.
- This can be avoided if there is coordination between various departments.
 5. 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. So, NO OVERLAPPING
between two divisions.

6. Subordination of Individual Interest to General Interest:

- According to Fayol Every employee must give priority to the interest of organisation while working
and decision making.
- The interests of an organisation should take priority over the interests of any one individual employee.
- Every worker has some Individual Interest for working in a company. The company has got its own
objectives.
- For example,

Organisational Interest Individual Interest

- The company would want to get MAXIMUM - An employee may want to get MAXIMUM SALARY
OUTPUT from its employees at a competitive cost while working the least.
(salary).
- Every employee is equal - An individual employee may demand some
concession 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.
- This will create good impression in the eyes of the workers and at the same time ensure same
behaviour by them.
7. 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 Positive Atmosphere and Good Relations between Workers and Management.
Consequently, the working of the company would be SMOOTH.
8. 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.
9. 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.”

- For example a situation where there is one head ‘A’ who has two lines of authority under her/ him.
1. One line consists of B-CD-E-F.
2. 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.
- However, in an EMERGENCY it can be possible that A WORKER CAN CONTACT CEO DIRECTLY.
10. 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’. 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.
11. 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.
- 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.
12. Stability of Personnel (Employees):
- According to Fayol. “Employee turnover should be minimised to maintain organisational efficiency”,
- Personnel should be selected and appointed after due and tough 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. So people will leave
the organisation.
- Stability in tenure of personnel is good for the business because Recruitment, selection and training
cost will be high.
13. Initative:
- 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.
- According to Fayol Workers should be encouraged to develop and carry out their plans for
improvements.
 - 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.
14. Esprit De Corps:
- According to Fayol Management should promote a TEAM SPIRIT of Unity and Harmony among
Employees,
- 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.
Comparison Henri Fayol Vs. F.W. Taylor

- Both of them have Contributed Immensely to the knowledge of management, which has formed a
basis for further practice by managers.
- It must be pointed out that their contributions are COMPLEMENTARY to each other.
-