SIGNIFICANCE OF MANAGEMENT PRINCIPLES

1. Optimum utilisation of resources and effective administration:

• A company has limited resources therefore they must put these resources to optimum use. Principles equip the managers to forecast the cause and effect relationship of their decisions and actions.
• Therefore, the wastages associated with trial and error approach and reduced.

2.Provide useful insights into reality:

• The principles of management provide the managers with useful insights into real world situations.
• These principles will increase the knowledge, ability and understanding of the managers.
• It will also help managers to learn from past mistakes.

3.Fulfilling social responsibility:

Management principles also guide the managers to perform social responsibilities. For example. One of the principle states that each employees should be treated equally in the company.

4. scientific/thoughtful decisions:

Management principles are based on the objective assessment of the situation. They emphasise on logic rather than blind faith, this help management to take unbiased decisions.

5. Management training, education and research:

• Management principles are used as a base for management training, education and research.
• These principles provide basic groundwork for the development of management as a discipline.
• Professional courses such as MBA, BBA also teach these principles as a part of their curriculum at the beginner’s level.

FAYOL’S PRINCIPLES OF MANAGEMENT

HENRI FAYOL

Lifetime – 1841 to 1925

Education – Graduated from mining academy at St. Entinne in 1880

                                    Profession – Mining engineer and management theorist

The 14 principles of management are given by Henri Fayol, he developed the principles based on his own experience.

These principles were discussed in detail in his book which was published in 1917 as ‘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. He is also known as ‘Father of General Management’ for his contribution.

Following are the 14 principles of management:

1. Division of work:

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”

What he wanted to say by this statement is that, work should be divided into small tasks and a trained employee who is competent is required to perform each job. This will result in increased efficiency and effective output. Thus, in a company we have various separate departments like finance, human resource, marketing etc.

This principle can be applied to both technical as well as managerial work.

2. Authority and responsibility:

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

Managers require authority in proportion with responsibility. There should be a balance between authority and responsibility.

FOR EXAMPLE- Ria is the marketing manager of Lenovo is assigned a responsibility of advertising of companies product and now she is required to Rs.5,00,000 to the advertising agency but she don’t have the authority to transfer any funds exceeding Rs.2,00,000 . This shows that there is imbalance in authority and respoinsibility in the organisation.

A manager must have the right to punish his subordinate for wilfully not obeying orders but only after sufficient opportunities has been given to a subordinate for presenting his case.

3. Discipline:

According to Fayol, discipline requires good superiors at all levels, clear and fair agreements and judicious application of penalties.

• It implies respect for agreements (rules and regulations) designed to secure obedience.
• It must prevail throughout an organization to ensure its smooth functioning.
• Discipline ensures fair and clear agreements, good supervision and judicious application of penalties

4. Unity of command:

According to Fayol there should be one and only one boss for every individual employee. He felt that if this principle is violated “authority is undermined, discipline is in jeopardy, order disturbed and stability threatened”. The principle states that in a formal organisation each participants should receive orders from one and be responsible to only one superior.

• 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. 

5. Unity of direction:

• All the units of an organisation should be moving towards the same objectives through coordinated efforts.
• Each group of activities having the same objectives must have one head and one plan.

FOR EXAMPLE- Honda produces cars as well a motorcycles therefore to avoid any  confusion it has two separate divisions for both of them . Each divisions have  a separate  incharge, plans and resources.

6. Subordination of Individual Interest to General Interest:

According to Fayol, The interests of an organisation should take priority over the interests of any one individual employee. Every individual have different interests for working in a company. But the company has its own objective. In all the situations the interest of company should supersede the interest of any one individual because larger interests of workers and stakeholders are more important than interest of any one person.

7. Remuneration of employees:

Remuneration should be just and equitable i.e. overall compensation or pay should be fair to both employees and the organisation. The employees should be paid fair wages so that they can at least afford a reasonable standard of living.

A fair compensation will ensure good relations between workers and management.

8. Centralisation and Decentralisation:

According to Fayol, “There is a need to balance subordinate involvement though decentralisation with managers’ retention of final authority through centralisation.”

The concentration of decision – making authority is called centralisation whereas its dispersal among more than one person is known as decentralisation. 

The degree of decentralisation depends on many factors such as size of the organisation, generally large organisations have more decentralisation.

9. Scalar chain:

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.”

An organisation consists of superiors and subordinates, let us consider a situation where there is one head ‘A’ who has two lines of authority under him. One line consists of B-C-D-E-F. Another line under ‘A’ is L-M-N-O-P.

If E has to communicate with ‘O’ who is at the same level of authority then 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 in the case of emergency then E can directly contact O through ‘Gang bang

10. Order:

According to Fayol, “people and materials must be in suitable places at appropriate time for maximum efficiency.”

If everything will be at fixed place, then there will be no hindrance in the action of business. This will lead to increased efficiency and productivity.

11. Equity:

This principle emphasises kindliness and justice in the behaviour of managers towards workers. There should be no discrimination on account of sex, religion, language, belief, nationality, caste, etc. This will ensure loyalty and devotion. There will be cordial relations between managers and workers. For example now-a-days in MNC’S we find people from different background working under same roof in a discrimination free environment.

12. Stability of personnel:

According to Fayol “Employee turnover should be minimised to maintain organisational efficiency.” A personnel should be selected after rigorous procedures and checks. But once they are selected they should be kept for at least a minimum fixed tenure.

They should be given reasonable time to show results. Recruitment, selection and training cost will be high if there’s insecurity among employees.

13. Initiative:

According to Fayol workers should be encouraged to develop and carry out their plans for improvements. Initiative means taking the first step with self-motivating.

A good company should have an employee suggestion system whereby suggestions which result in substantial cost/time reduction should be awarded.

14. Espirit De Corps:

According to Fayol, management should promote a team spirit of unity and harmony among employees. Management should promote team work especially in large organisation because otherwise objective would be difficult to realise. 

A manager should replace ‘I’ with ‘We’ in all his conversations with workers to foster team spirit.