14 Fundamental Principles of Management Formulated

by Henry Fayol
(1) Division of Work:

This principle of Fayol tells us that as far as possible the whole work should be divided into different parts and
each individual should be assigned only one part of the work according to his ability and taste rather than
giving the whole work to one person.

When a particular individual performs the same job repeatedly, he will become an expert in doing that
particular part of the whole job. Consequently, the benefits of specialization will become available.

For example, a furniture manufacturer gets an order for manufacturing 100 lecture stands. He has five workers
who will do the job. There are two ways to complete this order. First, every worker should be asked to complete
20 lecture stands.

The second method can be distributing different parts of the lecture stand-legs, top board, centre support,
assembling and polishing-to all the five workers in a manner that only one worker does the same job for all the
100 lecture stands. Here, Fayols indication is to the second way to do this job and not the former one.

The principle of division of labour applies not only to the workers but also equally to the managers. For
example, if a manager is tuned to work on the same kind of activities for a long period of time, he will certainly
be an expert in his particular job. Consequently, more and beneficial decisions can be taken in a comparatively
less time by him.

Positive Effect advantages of specialization are obtained, such as increase in the quality of work, increase in
the speed of production, decrease in the wastage of resources.

Violating Effect the above-mentioned positive effects of specialization will not be available.

(2) Authority and Responsibility:

According to this principle, authority and responsibility should go hand in hand. It means that when a particular
individual is given a particular work and he is made responsible for the results, this can be possible only when
he is given sufficient authority to discharge his responsibility.

It is not proper to make a person responsible for any work in the absence of authority. In the words of Fayol,
The result of authority is responsibility. It is the natural result of authority and essentially another aspect of
authority and whenever authority is used, responsibility are automatically born.

For example, the CEO of a company has doubled the sales target of the sales manager for the coming year. To
achieve this target, authority for appointing necessary sales representatives, advertising according to the need,
etc. shall have to be allowed. In case these things are not allowed the sales manager cannot be held
responsible for not

(3) Discipline:

Discipline is essential for any successful work performance. Fayol considers discipline to mean obedience,
respect for authority, and observance of established rules.
Discipline can be established by providing good supervision at all levels, clearly explaining the rules, and
implementing a system of reward and punishment. A manager can present a good example to his subordinates
by disciplining himself.

For example, if the employees break their promise of working up to their full capacity, it will amount to the
violation of obedience. Similarly a sales manager has the authority to do business on credit.

But in case he allows this facility not to the general customers but only to his relatives and friends, then it will
amount to ignoring his respect to his authority. (Note: Both these examples give a message of indiscipline
which is an undesirable situation.)

(4) Unity of Command:

According to the principle of unity of command, an individual employee should receive orders from only one
superior at a time and that employee should be answerable only to that superior. If there are many superiors
giving orders to the same employee, he will not be able to decide as to which order is to be given priority. He
thus finds himself in a confused situation.

Such a situation adversely affects the efficiency of the subordinates. On the other hand, when there are many
superiors, every superior would like his orders to be given priority. This ego problem creates a possibility of
clash. Consequently, their own efficiency is likely to be affected.

(5) Unity of Direction:

Unity of direction means that there should be one head for one plan for a group of activities having the same
objective. In other words, there should be one plan of action for a group of activities having the same objective
and there should be one manager to control them.

For example, suppose an automobile company is manufacturing two products, namely, scooters and cars,
hence having two divisions.

As each product has its own markets and problems therefore each division must have its own targets. Now
each division must plan its target as per its environmental conditions to get better results. It is necessary to
distinguish between the meaning of the unity of command and the unity of direction

Unity of command means that there should be only one manager at a time to give command to an employee,
while the unity of direction means that there should be only one manager exercising control over all the
activities having the same objective.

Unity of Command & Unity of Direction

In this connection Fayol feels that for the efficient running of an organisation the unity of direction is important,
while the unity of command is important to enhance the efficiency of the employees.

(6) Subordination of Individual Interest to General Interest:

This principle can be named Priority to General Interest over Individual Interest. According to this principle, the
general interest or the interest of the organisation is above everything. If one is asked to place individual
interest and the general interest in order of priority, definitely the general interest will be placed at the first
place.

For example, if a manager takes some decision which harms him personally but results in a great profit to the
company, he should certainly give priority to the interest of the company and take the decision accordingly. On
the contrary, if some decision helps the manager personally but results in a great loss to the company, then
such a decision should never be taken.

For example, a purchase manager of a company has to purchase 100 tonnes of raw material. His son happens
to be a supplier along with other suppliers in the market. The manager purchases the raw material from the
firm of his son at a rate higher than the market rate. This will profit the manager personally, but the company
will incur heavy loss. This situation is undesirable.

(7) Remuneration to Employees:

Fayol is of the opinion that the employees should get a fair remuneration so that the employees and the
owners find equal amount of satisfaction. It is the duty of the manager to ensure that employees are being paid
remuneration according to their work. If, however, they are not paid properly for their work, they will not do their
work with perfect dedication, honesty and capacity.

As a result, the organisation shall have to face failure. Proper remuneration depends on some factors like the
cost of living, demand of labour and their ability. Fayol feels that in order to motivate the employees, apart from
general remuneration, they should be given some monetary and non-monetary incentives.

For example, suppose that the things are getting dearer and dearer and the company is getting good profits. In
such a situation, the remuneration of the employees should be increased even without their asking. If this is not
done, the employees will leave the company at the first opportunity. Expenses shall have to be incurred on new
recruitment which shall bring loss to the company.

(8) Centralisation and Decentralisation:

According to this principle, the superiors should adopt effective centralisation instead of complete centralisation
and complete decentralisation. By effective centralisation, Fayol does not mean that authority should be
completely centralised.

He feels that the superiors should keep the authority of taking important decisions in their own hands, while the
authority to take daily decisions and decisions of less importance should be delegated to the subordinates.

The ratio of centralisation and decentralisation can differ in different situations. For example, it is advantageous
to have more centralisation in a small business unit and more decentralisation in a big business unit.

For example, the decisions in respect of determining the objectives and policies, expansion of business, etc.
should remain in the hands of the superiors. On the other hand, authority for the purchase of raw material,
granting leave to the employees, etc. should be delegated to the subordinates.

Positive Effect

(i) Decrease in the workload of superiors

(ii) Better and quick decisions
(iii) Increase in the encouragement to the subordinates

Violating Effect

(i) Unnecessary increase in the workload of the superiors in case of centralisation and of the subordinates in
case of decentralization
(ii) Impatient and wrong decisions by the superiors in case of complete centralisation and weak decisions by
the subordinates in case of complete decentralization
(iii) Decline in the encouragement to subordinates in case of complete centralisation
(9) Scalar Chain:

(i) Meaning of Scalar Chain:

It refers to a formal line of authority which moves from highest to the lowest ranks in a straight line,
(ii) Fayols Opinion:
This chain must be followed in a strict manner. It means each communication must move from top to bottom
and vice versa in a straight line. The important condition here is that no step (post) should be overlooked
during communication.
(iii) Fayols Ladder:
Fayol has explained this principle with the help of a ladder.

For example, in a company the employee F wants to have contact with the employee P. According to the
principle of scalar chain F shall have to reach A through the medium of E,D,C,B and then having contact with
L,M,N,0 shall reach P. Thus F shall have to take the help of all the nine steps (posts) to have business
contact with P.

(iv) Utility:
Due to more clear system of authority and communication, problems can be solved faster.
(v) Gang Plank:
It is the exception of the principle of scalar chain. This concept was developed to establish a direct contact
with the employee of equal rank in case of emergency to avoid delay in communication.

For example, as shown in the diagram employee F can have direct contact with employee P. But for doing so
employees F and P shall have to seek the prior permission of their immediate bosses E and O. The details
of their talk also shall have to be given to them.

(10) Order:

According to the principle of order, a right person should be placed at the right job and a right thing should be
placed at the right place. According to Fayol, every enterprise should have two different orders-Material Order
for Physical Resources and Social Order for Human Resources.

Keeping the physical resources in order means that a proper place for everything and everything in its right
place. Similarly, keeping the human resources in order means a place for everyone and everyone in his
appointed place.

Maintaining these two orders properly will ensure that everybody knows his workplace, what he is to do and
from where he would get his required material. Consequently, all the available resources in the organisation
will be utilised properly.

Gang Plank: A Special Note

Gang Plank can only be established with the employees of the equal or same level. For example, in the
present example no gang plank can be established between F and O.

For example, an employee working in a factory should know the place or source from where he can get his
tools in case of need. Similarly, he should know the place where his supervisor will be available in case of any
need.

It is, however, important to note that it is not sufficient to have an allotted place for a toolbox and for the
supervisor but the availability of both at their decided place is absolutely important. If this is not the case, it can
lead to a heavy loss as a result of damage to the machines.
(11) Equity:

This principle tells that the managers should treat their subordinates in a just and kind manner so that they
develop a feeling of dedication and attachment for their work. All the employees should be treated equally and
impartially.

Fayol tells us in connection with this principle that there should not be any equality of treatment between a
person whose work is really good and a person who is a shirker by nature.

Rather, the latter should be treated sternly. Doing so would be equitable. It is because of this point of view that
Taylor has presented his differential remuneration method.

(12) Stability of Personnel:

From the point of view of management it is absolutely harmful to change the employees frequently as it is a
reflection of inefficient management. Therefore, according to this principle there should be stability of tenure of
the employees so that the work continues efficiently.

Fayol thinks that instability in the tenure of employees is a cause of poor management and results. High rate of
labour turnover will result in increased expenses because of selecting them time and again, and giving them
training afresh.

It also lowers the prestige of the organisation and creates a feeling of insecurity among the employees which
keeps them busy in finding out new avenues of work. Consequently, the sense of dedication cannot be created
among them.

For example, it is true that if the workers in a company are not treated well and the atmosphere in the company
is also unhealthy, the employees will not stay for a long time. In other words, they will leave the company at the
first opportunity available. This situation is absolutely harmful.

For example, a labourer completes 10 units of goods in a day. Another labourer who happens to be a relative
of the supervisor completes 8 units but both get equal remuneration. This violates the principles of equality.
The second labourer should get less remuneration than the first one.

(13) Initiative:

Initiative means the capacity to work while expressing ones thoughts. According to Fayol, it is the duty of the
manager to encourage the feeling of initiative among his employees for doing some work or taking some
decision but within the limits of authority and discipline.

It will be possible only when the manager will welcome the thoughts of his/her subordinates. By doing so the
subordinates will present new and useful ideas time and again and gradually they will become an integral part
of the organisation. In order to make this process a success a manager will have to abandon his false sense of
prestige.

For example, a salesman suggests to his sales manager to implement a new advertisement technique. The
sales manager sends him away by telling him that it is not possible and ignores the suggestion altogether.

In such a situation the salesman, who has been admonished and belittled, will never venture to offer any
suggestion in future because his desire of taking initiative has been suppressed.
On the contrary, if his suggestion had been listened to carefully (even though not to be implemented) he could
have taken the courage to offer some suggestion in future. Such an action would simply have encouraged his
initiative.

Positive Effect

(i) Increase in the thinking power of the employees

(ii) Cooperation of the employees in implementing decisions
(iii) Increase in the sense of attachment to the organisation Violating Effect
(iv) Decline in the thinking power of the employees
(v) An atmosphere of non-cooperation
(vi) Decline in the employees attachment to the company

(14) Esprit de corps:

As per this principle, a manager should continuously make efforts to develop a team spirit among the
subordinates. To do this, he/she should use the word We instead of during the conversation with
subordinates.
14 Fundamental Principles of Management Formulated by Henry Fayol

DIVISION OF WORK: Work should be divided among individuals and groups to ensure that effort and attention
are focused on special portions of the task. Fayol presented work specialization as the best way to use the
human resources of the organization.

AUTHORITY: The concepts of Authority and responsibility are closely related. Authority was defined by Fayol
as the right to give orders and the power to exact obedience. Responsibility involves being accountable, and is
therefore naturally associated with authority. Whoever assumes authority also assumes responsibility.

DISCIPLINE: A successful organization requires the common effort of workers. Penalties should be applied
judiciously to encourage this common effort.

UNITY OF COMMAND: Workers should receive orders from only one manager.

UNITY OF DIRECTION: The entire organization should be moving towards a common objective in a common
direction.

SUBORDINATION OF INDIVIDUAL INTERESTS TO THE GENERAL INTERESTS: The interests of one

person should not take priority over the interests of the organization as a whole.

REMUNERATION: Many variables, such as cost of living, supply of qualified personnel, general business
conditions, and success of the business, should be considered in determining a workers rate of pay.

CENTRALIZATION: Fayol defined centralization as lowering the importance of the subordinate role.
Decentralization is increasing the importance. The degree to which centralization or decentralization should be
adopted depends on the specific organization in which the manager is working.

SCALAR CHAIN: Managers in hierarchies are part of a chain like authority scale. Each manager, from the first
line supervisor to the president, possess certain amounts of authority. The President possesses the most
authority; the first line supervisor the least. Lower level managers should always keep upper level managers
informed of their work activities. The existence of a scalar chain and adherence to it are necessary if the
organization is to be successful.

ORDER: For the sake of efficiency and coordination, all materials and people related to a specific kind of work
should be treated as equally as possible.

EQUITY: All employees should be treated as equally as possible.

STABILITY OF TENURE OF PERSONNEL: Retaining productive employees should always be a high priority
of management. Recruitment and Selection Costs, as well as increased product-reject rates are usually
associated with hiring new workers.

INITIATIVE: Management should take steps to encourage worker initiative, which is defined as new or
additional work activity undertaken through self-direction.

ESPIRIT DE CORPS: Management should encourage harmony and general good feelings among employees.