Principle of Management

Category :

2. Principles of Management

INTRODUCTION

Chapter 2 describes the principles of management with their concepts, meaning, nature and significance. Fayol, the father of general management, has given 14 principles beginning from Division of work and concluding with Espirit de Corps. Equally significant is Taylor's scientific management inclusive of principles and techniques.

Chapter at a Glance

PRINCIPLES OF MANAGEMENT

Principles of Management are general guidelines, which can be used for conduct in work places under certain situations. They help managers to take and implement decisions.

Note:

1. Principles of management is different from Techniques of management:

Management Principles	Basis	Management Techniques
Management principles are the guidelines used to take decisions or actions while practicing techniques.	Guidelines and methods	Management techniques are procedures or methods, which involve a series of steps to be taken to accomplish desired goals.
They are flexible	Flexibility and rigidity	They are rigid.

2. Principles of management is also different from values of management:

Management principles	Basis	Management values
Management principles are basic truths or guidelines for behaviour.	Basic truths and Desirability	Management values are something which are acceptable or desirable.
Management principles enhance managerial efficiency	Efficiency	Management values enhance social efficiency.
Management principles are formed after research in work situations which are technical in nature.	How they formed	Management values are general rules for behaviour of individuals in society formed through common practice.

Nature of Principles of Management

1. Universal Applicability

(i) The principles of management are intended to apply to all types of organization business as well as non-business, small as well large, public sector as well as private sector, manufacturing as well as the services sectors.

(ii) However, the extent of their applicability would vary with the nature of the organisation, business activity, scale of operations.

(iii) This principle is also applicable to a limited company where there are separate departments like Production, Finance, Marketing and Research and Development etc.

2. General Guidelines

(i) The principles are guidelines to action but do not provide readymade, straitjacket solution to all managerial problems.

(ii) This is so because real business situations are very complex and dynamic and are a result of many factors.

(iii) The importance of principles cannot be underestimated because even a small guideline helps to solve a given problem.

(iv) For example, in dealing with a situation of conflict between two departments, a manager may emphasise on the relevance of the overall goals of the organisation.

3. Formed by Practice and Experimentation

(i) The principles of management are formed by experience and collective wisdom of managers as well as experimentation as they are developed on the basis of live experiences of happenings of the past and observations of facts.

(ii) For example, it is a matter of common experience that discipline is indispensable for accomplishing any purpose.

(iii) 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. Flexible

(i) 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.

(ii) 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.

(iii) Moreover individual principles are like different tools serving different purposes, the manager has to decide which tool to use under what circumstances.

5. Mainly Behavioural

(i) Management principles aim at influencing behaviour of human beings. Therefore, principles of management are mainly behavioural in nature.

(ii) Moreover, principles enable a better understanding of the relationship between human and material resources in accomplishing organisational purposes.

(iii) 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

(i) The principles of management are intended to establish relationship between cause and effect so that they can be used in similar situations in a large number of cases.

(ii) The principles of management are less than perfect since they mainly apply to human behaviour. In real life, situations are not identical.

(iii) 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.

7. Contingent

(i) The application of principles of management is contingent or dependent upon the prevailing situation at a particular point of time.

(ii) The application of principles has to be changed as per requirements.

(iii) For example, employees deserve fair and just remuneration.

(iv) But what is just and fair is determined by multiple factors. They include contribution of the employee, paying capacity of the employer and also prevailing wage rate for the occupation under consideration.

Significance of Principles of Management

1. Providing managers with useful insights into reality:

(i) The principles of management provide the managers with useful insights into real world situations. Adherence to these principles will add to their knowledge, ability and understanding of managerial situations and circumstances.

(ii) It will also enable managers to learn from past mistakes and conserve time by solving recurring problems quickly. So management principles increase managerial efficiency.

(iii) For example, a manager can leave routine decision-making to his subordinates and deal with exceptional situations which require her/his expertise by following the principles of delegation.

2. Optimum utilisation of resources and effective administration:

(i) Resources both human and material available with the company are limited. They have to be put to optimum use.

(ii) By optimum use, we mean that the resources should be put to use in such a manner that they should give maximum benefit with minimum cost. Principles equip the managers to foresee the cause and effect relationships of their decisions and actions. As such the wastages associated with a trial-and-error approach can be overcome.

(iii) Through managerial principles, establishing objectives, policies becomes easier that also enables effective administration.

(iv) Principles of management limit the boundary of managerial discretion so that their decisions may be free from personal prejudices and biases.

(v) For example, in deciding the annual budgets for different departments, rather than personal preferences, managerial discretion is bounded by the principle of contribution to organisational objectives.

3. Scientific decisions:

(i) Decisions must be based on facts, thoughtful and justifiable in terms of the intended purposes.

(ii) They must be timely, realistic and subject to measurement and evaluation. Management principles help in thoughtful decision-making.

(iii) They emphasise logic rather than blind faith. Management decisions taken on the basis of principles are free from bias and prejudge.

(iv) They are based on the objective assessment of the situation.

4. Meeting changing environment requirements:

(i) In order to survive and grow, it is compulsory for an organisation to continuously adapt itself as per changing business environment.

(ii) Management principles train the managers to adopt the changes in technology in right direction.

(iii) 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.

5. Fulfilling social responsibility:

(i) Management theory and managements Principles have also evolved in response to the increased social responsibility.

(ii) Business has its own responsibility not only to the shareholders but also to workers, customers, society and the government. Management has to discharge all these responsibilities.

(iii) For example, the principle of fair remuneration insists on adequate salary to employees and takes care of interest of employees also.

6. Management training, education and research:

(i) Managerial principle are used as a basis for management training, education and research.

(ii) These principles provide basic groundwork for the development of management.

(iii) These principles enable refinement of management practices by facilitating the development of new management techniques like operations research, cost accounting and just in time.

TAYLORS SCIENTIFIC MANAGEMENT

(i) Fredrick Winslow Taylor: Founder of scientific management movement.

(ii) Profession: American mechanical engineer

(iii) Lifetime: March 20, 1856 to March 21, 1915.

(iv) Education: Degree in Mechanical Engineering from Stevens Institute of Technology in 1883.

(v) Positions Held:

(a) Apprentice Machinist in 1874.

(b) Executive at Midvale Steel Company in 1884.

(d) Professor at Tuck School of Business' at Dartmouth College founded in 1900.

(e) President of American Society of Mechanical Engineers from 1906 to 1907.

(vi) Writings:

(a) The Principles of Scientific Management-series of articles published in The American Magazine during MarchMay 1911, later published in book form.

(b) 'Concrete, Plain and Reinforced' in 1906.

· 'Notes on Belting' in 1893.

· 'On the Art of Cutting Metals' in December 1906.

· 'A Piece Rate System' in June 1895.

· The Making of a Putting Green-a series of articles published in 1915.

· 'Not for the Genius but for the Average Man' published in The American Magazine' in March 1918,

(vii) Contributions:

(a) Techniques of Scientific Management:

· Functional Foremanship

· Standardisation and Simplification of work

· Method study

· Motion study

· Time study

· Fatigue study

· Differential Piece Wage System

Note: Taylor's ideas lies not in the description of principles and techniques of scientific management, but in the change of mindset, which he referred to as Mental Revolution.

(b) Principles of Scientific Management:

· Science, not rule of thumb

· Harmony, not discord

· Cooperation, not individualism

· Development of each and every person to his or her greatest efficiency and prosperity.

He is called as Father of Scientific Management, because he made the following significant contributions to the management thought:

· Principles of Scientific Management: He developed the principles of scientific management.

· Techniques of Scientific Management: He developed various techniques of scientific management through various experiments.

Meaning and Principles of Scientific Management

1. Meaning: According To Taylor, Scientific Management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.

2. Principles of Scientific Management

(i) Science, Not Rule of Thumb:

· This principle suggests the development and use of scientific methods in order to replace the old rule of thumb approach or hit and trial method.

· The purpose of using scientific methods are:

(a) To determine time normally required to perform a job;

(b) To determine a fair day's work for the workmen;

(d) To set work standards (e.g., selecting standard tools and equipment, maintaining standard working conditions).

· Scientific method requires cause and effect as well as the exact measures of effort and output to be kept in view for any work to be performed.

· For example, the use of internet has brought about dramatic improvements in internal efficiencies and customer satisfaction.

(ii) Harmony, not Discord:

· This principle requires that there should be a complete harmony between worker and management with respect to their mutual relations and work efforts.

· To achieve this, Taylor advocated a complete Mental revolution i.e., a change in the attitude of workers and management towards one another from competition to cooperation.

· Mental revolution on the part of management are:

(a) Management should adopt an enlightened attitude.

(b) Management should share the gains of productivity with workers.

· Mental revolution on the part of workers are:

(a) Workers should perform their work with utmost devotion, discipline and loyalty.

(b) Workers should utilise the resources very efficiently.

· This principle is necessary to derive the benefits of scientific management through harmony and co-operation rather than individualism and discord.

· In Japanese companies, 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.

(iii) Cooperation, not Individualism:

· There should be complete cooperation between the labour and the management instead of individualism. This principle is an extension of principle of 'Harmony not discord'.

· Competition should be replaced by cooperation. Both should realise that they need each other.

· For this, 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 goodwill, there will be no need for even a trade union.

· Paternalistic style of management, whereby the employer takes care of the needs of employees, would prevail as in the case of Japanese companies.

· 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 the workers helping, encouraging and smoothing the way for them.

(iv) Development of Each and Every Person to his or her Greatest Efficiency and Prosperity:

· Industrial efficiency depends to a large extent on personnel competencies. As such, scientific management also stands for worker development.

· 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 physical, mental and 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

1. Functional Foremanship:

(i) In the factory system, foreman represents the managerial figure with whom the workers are in direct face-to-face contact on a daily basis.

(ii) He is the pivot around whom revolves the entire production, planning, implementation and control.

(iii) Thus, Taylor concentrated on improving the performance of this role in the factory set-up.

(iv) Functional foremanship is shown below:

(v) In fact, Taylor identified a list of qualities of a good foreman/supervisor and found that no single person could fit them all. This prompted him to suggest 8-person functional foremanship. Functional foremanship is a technique which involves supervision of a work by several specialist foremen.

(vi) Each of these specialists is responsible for one of the functions which require certain qualities. Foremen should have intelligence, education, tact, grit, judgement, special knowledge, manual dexterity, energy, honesty and good health.

(vii) It was known as functional foremanship. Under the factory manager, there was planning incharge and production incharge. Under planning incharge 4 personnel namely Instruction Card clerk, Route clerk, Time and cost clerk and Disciplinarian worked.

Under production incharge personnel who will work are Speed boss, Gang boss, Repair boss and Inspector.

(viii) Duties of Specialists: The duties of each specialist foreman are given below:

Specialist	Duty
Instruction card clerk	To draft the instructions be followed by workers in handling the jobs given to them.
Route clerk	To chart out the sequence of mechanical and manual operations.
Time and cost clerk	To fix up the dates of starting and completing the work as per schedule and routes determined in advance. Cost sheets are also prepared for each operation detailing out its cost of materials, labour and expenses.
Disciplinarian	To ensure orderly systematic performance of the job.
Speed boss	To ensure timely and accurate completion of the job.
Gang boss	To keep machines, materials, tools, etc. ready for operation by the concerned workers.
Repair boss	To ensure that machines and tools are kept in proper working position. Work worthiness of the plant in his concern.
Inspector	To check up the quality of the work turned out by the workers.

(ix) Example: Under functional foremanship, matters relating to speed of work and repairs are supervised by speed boss and repair boss respectively.

(x) Purpose: The purpose of functional foremanship is to improve the quality of supervision of workers by employing specialist foremen. Taylor believed that a single foreman may not be competent to supervise all functional matters.

(xi) Usefulness: Functional foremanship is useful for the production department.

2. Stardardisation and Simplification of Work:

(i) Standardisation:

· Standardisation is a technique which involves the establishment of:

(a) Standard tools and equipments for use by workers, and

(b) Standard methods of work;

(d) Standard materials;

(e) Standard quality and utility of output,

(f) Standard working conditions at the workplace.

· Standardisation is thus process of setting standards for every business activity.

· Objectives of standardisation are:

(a) To reduce a given line of product to fixed types, sizes and characteristics;

(b) To establish interchangeably of manufactured parts and products

(d) To establish standards of performance of men and machines.

· The purpose of standardisation is to attain the efficient performance of jobs.

(ii) Simplification of work:

· Simplification refers to the elimination of superfluous varieties, sizes and dimensions.

· The purpose of simplification is to eliminate unnecessary diversity products.

· The advantages of simplification are:

(a) Simplification leads to economy in the use of machines and tools needed.

(b) It reduces labour costs through increased specialisation of task.

(d) It facilitates fuller utilisation of equipment through uninterrupted runs and fewer machine set-ups.

(e) It helps in improving the quality, increasing the turnover at reduced costs and prices.

· Simplification movement in the USA resulted in reduction of substantial number of superfluous varieties of paper work proving to be an economic drag. For example, varieties of paper were reduced from 2,000 to 200.

3. Method Study

(i) 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.

(ii) Right from procurement of raw materials till the final product is delivered to the customer every activity is part of method study.

(iii) Taylor devised the concept of assembly line by using method study. Ford Motor Company used this concept very successfully. Even now auto companies are using it.

(iv) The objective of the whole exercise is to minimise the cost of production and maximize the quality and satisfaction of the customer. For this purpose, many techniques like process charts and operations research etc. are used.

(v) For designing a car, the assembly line production would entail deciding the sequence of operations, place for men, machines and raw materials etc. All this is part of method study.

4. Motion Study

(i) Motion study refers to the study of movements of body and limbs like lifting, putting objects, sitting and changing positions etc., which are undertaken while doing a typical job.

(ii) The purpose of motion study is to identify and eliminate wasteful motions, so that it takes less time to complete the job efficiently.

(iii) On close examination of body motions, for example, it is possible to find out:

· Motions which are productive.

· Motions which are incidental (e.g., going to stores).

· Motions which are unproductive.

(iv)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

(i) Time study is a technique which is used to measure the time that may be taken by a workman of reasonable skills and ability to perform various elements of the tasks in a job.

(ii) The purpose of time study is:

· To determine standard time normally required to perform a well-defined job; and

· To determine a fair day's work for the workman;

· To determine the number of workers;

· To determine labour costs;

· To frame suitable incentive schemes;

(iii) Time study is conducted with the help of stopwatch to observe time taken by each element of task. The method of time study will depend on the volume and frequency of the task, the cycle time of the operation and time measurement costs.

(iv) For example, on the basis of several observations it is determined that standard time taken by the worker to make one cardboard box is 20 minutes. So in one hour she/he will make 3 boxes. Assuming that a worker has to put in 8 hours of work in a shift and deducting one hour for rest and lunch, it is determined that in 7 hours a worker makes 21 boxes @ 3 boxes per hour. Now this is the standard task a worker has to do. Wages can be decided accordingly.

6. Fatigue Study

(i) Fatigue study is a technique which is used to determine the amount and frequency of rest intervals in completing a task.

(ii) Taylor suggested that frequent rest pauses should be provided to the workers for their efficient functioning. If a worker is allowed rest intervals, he will be able to regain stamina and start working with same capacity.

(iii) For example, an employee continues to work in the second and third shift, he may feel totally exhausted and will not continue to work any longer, even within one shift, an employee needs short term breaks to refresh him.

(iv)There can be many causes for fatigue like long working hours, doing unsuitable work, having uncordial relation with boss or bad working conditions etc. Such hindrances in good performance should be removed.

Note - Work Study:

(i) Work study refers to a scientific study of techniques to determine a fair day's work for every worker.

(ii) Its main objective is to improve efficiency.

(iii) It includes method, motion, time and fatigue studies

Work study = Motion study + Time study + Method study + Fatigue study

7. Differential Piece Wage System

(i) Differential piece rate plan is a method of wage payment in which efficient and inefficient workers are paid at different rates viz., higher rate per piece for a worker who produces equal to or more than a certain number of pieces and lower rate per piece for a worker who produces less than a certain number of pieces.

(ii) The purpose of differential piece rate plan is to distinguish between an efficient worker and an inefficient worker by linking rewards with performance. This plan motivates workers to produce more and earn more.

(iii) For example, in one department, standard is set to produce 200 units per week and the wage rate ` 20 per unit for those who are performing up to and above standard and ` 15 for those who are producing below standard. Suppose X produces 199 units, his wages would be ` 2985 (15 x 199). If Y produces 201 units thus, his wages would be ` 4020 (20 x 201). The gap of two units will amount to a loss of more than ` 1000. According to Taylor, this loss will be the strongest motivator for a worker to reach standard performance.

Note: Taylor's ideas lies not in the description of principles and techniques of scientific management, but in the change of mindset, which he referred Mental Revolution.

Mental Revolution

(i) Mental revolution involves a change in the attitude of workers and management towards one another from competition to cooperation.

(ii) Both should realise that they require one another. Both should aim to increase the size of surplus. This would eliminate the need for any agitation,

(iii) 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.

FAYOL'S PRINCIPLES OF MANAGEMENT

· Henri Fayol: Father of General Management

· Life Time: 1841 to 1925

· Profession: Mining Engineer and Management Theorist (French National)

· Education: Graduated from Mining Academy at St. Entinne, in 1880.

· Positions Held: Founded the mining company Cmpagnie de Commentry Fourchameau Decazeville and became its Managing Director in 1888 and remained till 1918.

· Writings: Administration Industrielle et generate. It was published in English as General and Industrial Management in 1949 and is widely considered a foundational work in classical management theory.

· Contributions: Mainly 14 Management Principles, which are referred to as administrative in nature in that they have Top-Down approach concerning top management and other managers conduct.

Why is Henri Fayol called as the Father of Management Thought?

Ans. Henri Fayol is called as the Father of Management Thought because he made the following three significant contributions to the theory of management.

· Distinction between various skills: He made a clear distinction between technical and managerial skills.

· Identification of functions of management: He identified the functions constituting the management process. These still serve as the standard designations (planning, organising, directing and controlling) used by most writers.

· Development of 14 principles of management: He developed principles of management that provided a basis for developing a prescriptive approach to categorizing management knowledge.

On the basis of his experiences and foresight in the field of management, Fayol suggested fourteen principles of management:

Fayols Fourteen Principles of management
1.	Division of work	8.	Centralisation and Decentralisation
2.	Parity of authority and responsibility	9.	Scalar chain
3.	Discipline	10.	Order
4.	Unity of command	11.	Equity
5.	Unity of direction	12.	Stability of Personnel
6.	Subordination of individual interest to general interest	13.	Initiative
7.	Remuneration of employees	14.	Espirit de Corps

1. Division of work

(i) Division of work implies dividing the work into compact jobs and allocating these compact jobs to different individuals.

(ii) When an individual does the same job on repetitive basis, he specialises in his task and thus acquires speed and accuracy in the performance. As a result, the efficiency every individual and of the whole organisation improves. Thus, division of labour facilitates specialisation and improves efficiency and results in increased output

(iii) According to Fayol, "The intent of division of work is to produce more and better work for the same effort. Specification is the most efficient way to use human effort". It may be noted that this principle applies to both managerial work and non-managerial work (i.e., technical).

(iv) For example, if one person is skilled in computer programming and that person continues to do that over a period s continuity of computerised work specialises him in that job and consequently improves his performance.

Positive effects/ advantages			Effects of violation
(i)	Specialization: When an employee repeats the same work again and again he will become specialist in that work. He will be able to handle the same very well.	(i)	Monotony: While doing the same work again and again, one starts feeling monotonous.
(ii)	Higher efficiency: While repeating the same work again and again, a person better and will improve his efficiency.	(ii)	Lack of initiative: A person goes on doing only one activity, he will not be able to do any new thing. The employees will not take any initiative in improving the work performance.

2. Parity of authority and responsibility

(i) Authority of an individual refers to his official right to take decisions on the tasks assigned to him and to manage people and other resources of organisation for the accomplishment of tasks assigned. Fayol conceives authority as a combination of official authority derived from manager's official position and personal authority (intelligence, experience, moral worth, past service, etc.).

(ii)Responsibility is the obligation of an individual to complete the tasks assigned to him and to give account of the result achieved in terms of the standard of performance laid down.

(iii) According to the principle of parity of authority and responsibility, there must be parity between authority and responsibility. If a person is given authority without corresponding responsibility, there may be arbitrary and unmindful use of authority. Similarly, if a person is given some responsibility without adequate authority, such person will be ineffective.

(iv) For example, if an employee is asked to perform the job of cash clerk then he should be allowed to take care of all the issues relating to performing the job of a cash clerk like accepting money in cash or draft or DD, time of getting the money, passing of entry, etc.

Positive effects/ advantages		Effects of violation
1.	Achievement of goals: When authority is equal of the amount of responsibility, an employee works more efficiently that leads to achievement of goals.	1.	Misuse of authority: There may be a fear that authority be misused by managers in absence of responsibility.
2.	Avoids duplication of work: There will be no chaos and duplication of work.	2.	Overburden: More responsibility may overburden the employee and performance may be adversely affected.

3. Discipline

(i) Discipline is the obedience to organisational rules and employment agreement which are necessary for the working of the organisation.

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

(iii) 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.

Positive effects/ advantages			Effects of violation
1.	Enhances efficiency: When workers obey discipline and follow rules and regulations properly, their efficiency will improve.	1.	Chaos and confusion: In the absence of discipline, there will be chaos and confusion in the organisation.
2.	Proper working: The observance of discipline in an organisation helps in systematising the work. Everybody will take their responsibility seriously which will help in improving the working environment.	2.	Affects employee productivity: lack of discipline will affect employee productivity and reduce his efficiency.

4. Unity of Command

(i) According to Fayol, there should be one and only one boss for every individual employee.

(ii) If an employee gets orders from two superiors at the same time, the principle of unity of command is violated.

(iii) 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.

(iv) Dual subordination should be avoided. This is to prevent confusion regarding tasks to be done.

(v) 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.

Positive effects/ advantages		Effects of violation
1.	Avoids overlapping: This principles avoids overlapping since one subordinate receives order from one superior only.	1.	Chaos and confusion: When subordinate takes the order from more than on superior it leads to chaos and overlapping of orders.
2.	Improves efficiency: Every employee knows to whom to obey and ask for instruction, it will improve efficiency of employees.	2.	Lack of accountability: If this principle is not followed, it leads to lack of accountability.

5. Unity of Direction

(i) According to this principle, there should be one head and one plan for a group of activities having the same objectives.

(ii) It is necessary to direct the efforts of all the members of the group towards common goals under the direction of one head.

(iii) For example, suppose an automobile company has three divisions: car, scooters, and three wheelers. Now, each divisions must have its own targets since, each product has its own market and problems.

Positive effects/ advantages		Effects of violation
1.	Achieving of organisation goals: Unity of direction helps in achieving organizational goals in a better way.	1.	Increases cost: When this principle is violated, unnecessary duplication of work and wastage of resource leads to increases in cost.
2.	Coordinated efforts: The efforts of all employees are directed in same direction for achieving targeted results.	2.	Difficulty in achieving goals: This principle may bring problems in achieving organizational goals. Every activity will have its own targets and there may be a lack of Coordination among different activities.

6. Subordination of Individual Interest to General Interest

(i) According to Fayol, the interests of an organisation should take priority over the interests of any one individual employee.

(ii) Every worker has some individual interest for working in a company. The company has got its own objectives.

(iii) For examples, 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.

(iv) In another situation, an individual employee may demand some concession, which is not admissible of 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.

(v) This is so because larger interests of the workers and stakeholders are more important than the interest of any one person.

(vi) 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.

Positive effects/ advantages		Effects of violation
1.	Achieving organizational goals: When organisational goals have priority over individual goals then it will be easy to achieve them.	1.	Resistance from employees: When employees goals are not fulfilled employees become resistant.
2.	Coordination: There will be a co-ordination between organisational and individual goals and former will get priority.	2.	Organisational goals suffer: Individuals try to achieve personal goals by ignoring organizational goals.

7. Remuneration of employees

(i) The overall pay and compensation should be fair to both employees and the organisation.

(ii) The employees should be paid fair wages, which should give them at least a reasonable standard of living.

(iii) At the same time it should be within the paying capacity of the company. In other words, remuneration should be just and equitable.

(iv) This will ensure congenial atmosphere and good relations between workers and management. Consequently, the working of the company would be smooth.

Positive effects/ advantages		Effects of violation
1.	Motivation of employees: When employees get fair remuneration for their work, they will be motivated to work more and more.	1.	Low morale: When fair wages and salaries are not given to the employees, it reduces their morale.
2.	Commitment of employees: The employees will be committed to the organisation and will feel a part of it.	2.	Poor manager-worker relationship: Absence of good wages and salaries leads to poor manager-worker relationship.

8. Centralisation and Decentralisation

(i) Centralisation of authority refers to relative concentration of authority for decision-making especially at top managerial level

(ii) Decentralisation of authority refers to relative dispersal of authority especially among the lower managerial levels to facilitate operational decision-making.

(iii) There should be proper combination and balance between centralisation and decentralisation in an organisation based on consideration of several factors such as experience of the superior, ability of the subordinate, size of the organisation etc.

(iv) 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.

Positive effects/ advantages		Effects of violation
1.	Quick Decision Making: Since decision making is a top level, decision making will be quick, operational decisions will be taken quickly at decentralised level.	1.	Reason for Confusion: When both centralisation and decentralisation are used, there may be some confusion at different levels for taking decisions.
2.	Motivation of employees: Employees become more motivated when adequate authority is given to them.	2.	Misuse of Authority: There is a likelihood of misuse of authority at different levels.

9. Scalar Chain

(i) 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.

(ii) In other words, Scalar chain implies the chain of superiors ranging from the highest to the lowest ranks in management. Each manager is superior to the manager below him but he is also subordinate to his own superior. It is necessary to determine clear lines of authority from top to bottom.

(iii) Authority relationships are said to be scalar when subordinates report to their immediate superiors and when their superiors report directly as subordinates to their superiors.

(iv) Scalar chain performs several functions such as:

· Determines Line of Authority: It determines the clear line of authority from top to bottom linking managers at all levels.

· Serves as a Chain of Command: It serves as a chain of command because orders or instructions issued at higher levels flow through middle levels before reaching lower levels.

· Serves as a Chain of Communication: It serves as a chain of communicator because all communications are required to flow through the chain in the hierarchy.

(v) Let us consider a situation where there is one head W who has two lines of authority under her/him. One line consists of B-C-D-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.

(vi) The concept of gang plank allows two employees at the same level to communicate directly with each other. But each one of them must inform his superior. The use of the concept of gang plank avoids the delays in communication through scalar chain.

(vii) 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.

(viii) 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.

Positive effects/ advantages		Effects of violation
1.	Systematic flow of Information: The information flows in a proper hierarchical way from top to bottom.	1.	Time Consuming: Communication through scalar chain is time consuming and causes delays.
2.	Quick Information through Gang Plank: When quick communication is needed at same levels of different segments then it can take place directly by avoiding the scalar chain.	2.	No clarity in Authority-Responsibility Relationship: The information is sent through various layers without establishing any authority-responsibility relationship. Many layers come in between unnecessarily and cause delays.

10. Order:

(i) According to Fayol, People and materials must be in suitable places at appropriate time for maximum efficiency.

(ii) Order refers to a systematic arrangement of materials (i.e., material order) and placement of people (i.e., social order) in the organisation.

(iii) Right place for everything and for everyone should be the guiding principle for every management.

(iv) Material order requires that there should be specific place for each material and each material must be in its allotted place, whereas Social order requires that there should be specific place of work for each employee and each employee must be in his assigned place of work. It is necessary to ensure effective utilization of physical and human resources employed in the organisation.

(v) For example, production manager may be allotted an office room in the factory, the typist a particular table, the foreman to supervise a particular workshop.

Positive effects/ advantages		Effects of violation
1.	Avoiding wastage of time: When materials or persons are available at fixed places then there will not be any wastage of time in locating them.	1.	Avoiding proper order: There is a tendency to avoid proper order for men and material. People may follow their whims and fancies.
2.	Smooth working: When men and materials are properly arranged, there will be a smooth working in the organisation.	2.	Lack of discipline: In the absence of order there, is lack of discipline among employees in the organisation.

11. Equity:

(i) Good sense and experience are needed to ensure fairness to all employees, who should be treated as fairly as possible, according to Fayol.

(ii) Equity refers to fair treatment to all workers in an organisation.

(iii) Fair treatment involves kindness and justice on the part of superiors while dealing with their subordinates.

(iv) In other words, it means that similar treatment should be assured to people in similar positions. For example, workers performing similar jobs should be paid the same wage rate. Equity promotes friendly atmosphere between superiors and subordinates and brings loyalty and devotion of the personnel.

(v) There should be no discrimination against anyone on account of sex, religion, language, caste, belief or nationality etc.

(vi) 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.

(vii) Thus, we find India-born CEO's such as Rajat Gupta who heads multinational like Mckinsey Inc. Lately India-born American, Arun Sarin has become CEO of Vodafone limited, a British telecom major.

Positive effects/ advantages		Effects of violation
1.	Employee Satisfaction: When all the employees are treated equally are treated equally, they will be happy and satisfied.	1.	Dissatification: There may be dissatisfication among some sections of employees who feel themselves better than others.
2.	Motivation: The employees will feel motivated and their morale will be boosted.	2.	Increased Turnover: The equity among employees may discourage some of them and labour turnover may increases.

12. Stability of Personnel:

(i) Employee turnover should be minimised to maintain organisational efficiency according to Fayol.

(ii) 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.

(iii) It is necessary to avoid the dangers and costs of unnecessary turnover. No employee possessing the requisite abilities should be removed within a short time because time is required for an employee to get used of new work and succeed in doing it well.

(iv) Frequent changes of personnel may not be good for the organisation. Any such change should be made only when it seems unavoidable as, in the case of illness, retirement or death of an employee.

Positive effects/ advantages		Effects of violation
1.	Improves efficiency: The stability of tenure of employees will improve their efficiency and performance.	1.	Lack of initiative: The same employees may not having new ideas and initiative.
2.	No wastage of time: The time taken by new employees in settling down to the job will be avoided.	2.	Bring lethargy: When employees are ensured of stable employment, they may become lethargic.

13. Initiative:

(i) 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.

(ii) An organisation should encourage desire and initiative among its managers and employees by extending opportunities and freedom to contribute their best.

(iii) This principle states that:

(a) Subordinates should be given an opportunity to take initiative in making and executing the plans.

(b) Subordinates with initiative should be encouraged within the limits of authority and discipline.

(iv) Initiative should not be confused with going against the established practice, or doing something against respect for authority or discipline.

(v) For example, every employee has a right to give suggestions about any matter of the organisation but once a decision is taken on any issue then there is no scope for disobedience.

(vi) A good company should have an employee suggestion system whereby initiative/ suggestions which result in substantial cost/time reduction should be rewarded.

Positive effects/ advantages		Effects of violation
1.	Feeling of belongingness: When employees suggestions are given due weights age, they will develop a feeling of belongingness to the organisation.	1.	May cause dissatisfaction: If the suggestions of employees are not accepted, then they may feel discouraged and dissatisfied.
2.	Encouraging employees: the employees will feel encouraged if they are given a chance to give suggestions on different aspects of the business.	2.	May adversely affect work: When workers are encouraged of take initiatives, then day to day work may be adversely affected.

14. Espirit de Corps:

(i) Management should promote a team spirit of unity and harmony among employees, according to Fayol.

(ii) It refers to team spirit. Managers must take steps to develop a sense of belonging among the members of a work group.

(iii) This principle emphasises the need for teamwork. It facilitates the development of an atmosphere of mutual trust and understanding among employees and minimises the need to use penalties for default.

(iv) This principle states that the unity is the strength and the managers should infuse the spirit of teamwork in their subordinates.

Positive effects/ advantages		Effects of violation
1.	Develops team spirit: This principle helps in developing a team spirit for undertaking various tasks.	1.	Avoiding work: When work is done collectively, then some employees may not contribute whole heartedly, while others may have to work more.
2.	Improves performances: A work done in a team spirit will bring better results and improves performance.	2.	Discourages efficient employees: Efficient employees may feel discouraged since the credit for good performance goes to all and not to individual.

DIFFERENCES BETWEEN CONTRIBUTION OF FAYOL AND TAYLOR

Henri Fayol	Basis	F.W. Taylor
Fayol principles were developed from perspective of top level of management.	Perspective	Taylor gave the principles and techniques keeping in mind shop floor or level of factory
This principle is strictly followed.	Unity of command	Did you feel that it is important as under functional foremanship a worker received order from (8) eight specialist.
Applicable universally as they are more flexible.	Applicability	Applicable to specialised situations as they are less flexible.
Improving overall administration of the organisation.	Focus	Observation and experimentation.
Practitioner and is known as the father of general management.	Personality	Scientist and is known as the father of the scientific management.
General theory of management	Expression	Scientific management.

Words that Matter

1. Principles of Management: Principles of Management are general guidelines, which can be used for conduct in work places under certain situations.

2. Scientific Management: According to Taylor, Scientific Management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.

3. Method Study: Method study refers to finding one best way of doing a job.

4. Motion study: Motion study refers to the study of movements of body and limbs like lifting, putting objects, sitting and changing positions etc., which are undertaken while doing a typical job.

5. Time study: Time study is a technique which is used to measure the time that may be taken by a workman of reasonable skills and ability to perform various elements of the tasks in a job.

6. Fatigue study: Fatigue study is a technique which is used to determine the amount and frequency of rest intervals in completing a task.

7. Work study: Work study refers to a scientific technique to determine a fair day's work for every worker.

Work study = Motion study + Time study + Method study + Fatigue study

8. Differential piece wage system: Differential piece wage system is a method of wage payment in which efficient and inefficient workers are paid at different rates viz., higher rate per piece for a worker who produces equal to or more than a certain number of pieces and lower rate per piece for a worker who produces less than a certain number of pieces.

9. Mental revolution: Mental revolution involves a change in the attitude of workers and management towards one another from competition to cooperation.

directly as subordinates to their superiors.

(d) 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-C-D-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.

(ii) Gang Plank:

(a) The concept of gang plank allows two employees at the same level to communicate directly with each other. But each one of them must inform his superior. The use of the concept of gang plank avoids the delays in communication through scalar chain.

(b) 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.

(c) 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.

Notes - Time and Clocks

Principle of Management

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