Principles of effective organisation and management

Fayol also suggested that there are 14 principles of effective organisation and management. Some of
these might not be valid for every business organisation and have been challenged by subsequent writers
on management theory. The 14 principles are as follows.
 Specialisation and the division of labour. The efficiency and effectiveness of a business
organisation is improved through specialisation. Work should be divided into separate areas of
activity, each with its own specialists with particular skills. By focusing on a particular skill,
individuals become more efficient and produce work of a higher standard. For example, the
labour required to build a house can be divided into specialisations such as bricklaying, roofing,
plastering, electricity work, plumbing and decorating. Specialists in these tasks should be able to
construct a better house more quickly than a team of general building employees who do not
have any particular specialisation.
 Authority and corresponding responsibility. If a manager is made responsible for a particular
aspect of operations or business activity, he or she must be given the authority that is necessary
to fulfil the responsibilities properly. Having the necessary authority means:
o Having the authority to make decisions relating to the activities for which themanager is
responsible, and also
o Having the necessary resources allocated to the activities in order to do the work
properly. Allocated resources are budgets (for expenditure), staff and assets.
The authority given to a manager should always correspond exactly with the
responsibilities of the manager. A manager should not be given authority without
responsibility, nor should he be given responsibility without the necessary authority.
 Discipline. Fayol argued that discipline is essential for trouble-free operations. Without discipline,
standards fall and there is no consistency of action. Fayol defined discipline as ‘obedience,
application, energy, behaviour and outward marks of respect that are observed in accordance
with standing agreements’ between a firm and its employees.
 Unity of command. The principle is that an employee should receive instructions from one
superior only. No-one should have two bosses, who might give conflicting and contradictory
instructions. When an employee has two bosses, each giving instructions, he might get into a
situation where one boss is telling him to do one thing and the other is telling him to do something
different. Alternatively, nether boss might give instructions or direction, assuming that the other
boss has given the instructions already. It is argued that in a matrix organisation the principle of
unity of command cannot apply, because individuals have two bosses. However, even in matrix
organisations one boss has the ultimate authority over any individual. For example, when there
are project managers in a matrix organisation, individuals report to their functional/departmental
manager and the role of the project manager is to negotiate and persuade rather than to give
directions.
 Unity of direction. An organisation and its employees should have unity of direction. This means
having one agreed plan and objective for any particular group of related activities.
 Subordination of individual interests to the general interest. Fayol argued that the interests
of any one person or group of employees must not be allowed to prevail over the interests of the
organisation as a whole. He assumed that everyone in an organisation should have a shared set
of values and that the interests of the organisation as a whole are reasonable and can be
identified. A weakness of this principle is that there might be disagreement about what the
‘general interest’ of the organisation should be. Is it to maximise profits? Or should considerations
of ethical behaviour or business risk affect the general interest? And if so, how might business
ethics and concern for risk affect the interests of the organisation?
 Remuneration of employees. Fayol’s principle was that the remuneration of staff should be
‘fair’. As far as possible employee remuneration should satisfy both the employees and the
employer, as the ‘price of services rendered’.
 Centralisation. Fayol argued that some form of centralisation/ centralized control over the
business is essential for an efficient and effective organisation. Centralisation and
decentralisation are considered in more detail later.
 Scalar chain/line of authority. The scalar chain in an organisation is the chain of command and
communication that runs from senior management at the top of the organisation down to the
 employees at the bottom. Fayol argued that the chain of command and reporting relationships
must be sensible and clearly understood.
 Order. This is another principle of organisation and management that might be challenged. Fayol
argued that employees need to have a sense of order in their work. They need to know where
they fit into the organisation structure and understand what the organisation expects them to do.
They need policies, rules and instructions that are understandable. Having order in the work
place implies that any changes to procedures and processes should be gradual and evolutionary,
rather than radical (because radical change will provoke anxiety amongst employees). This
principle is not accepted by those who argue that radical changes to processes and business
systems are often essential for a business to maintain or improve its competitiveness.
 Equity. A sense of fairness and justice should exist throughout an organisation.
 Stability of tenure. An employee needs time to get used to a job and perform it effectively.
Employees should therefore be given stability of tenure in their job, and should not be moved
continually from one job to another. Stability of tenure also promotes employee loyalty to the
organisation.
 Initiative. If employees at all levels in the organisation are given scope to show initiative, there
will be much more enthusiasm and energy. This principle of Fayol is supported by management
theorists such as Tom Peters who have argued that the performance of an organisation is
improved by ‘empowering’ employees to use their initiative and make decisions for themselves.
 Esprit de corps. In an efficient and effective organisation, there is a strong sense of belonging to
a team. Team work and interpersonal relationships are strong and positive.