PRINCIPLES OF GENERAL MANAGEMENT

(FAYOL)

CHAPTER 2 PART 1
A principle is broad and general guideline for
decision making and behaviour.

•It refers to a fundamental truth

•It establishes cause and effect relationship
between two or more variables under given
situation
•They serve as a guide to thought & actions
 HENRY FAYOL

Henry Fayol, a french mining

engineer, who later became
the managing director of the
same company

He was the first one to identify four functions of management as --

Plan, Organise, Command, Coordinate and Control.
Acc. to Fayol, all activities of an industrial undertaking could
be divided into following activities:
● Technical
● Commercial
● Financial
● Security
● Accounting
● Managerial

Henry Fayol is called the ‘ Father of General

Management.
 DIVISION OF WORK
● According to Fayol, “The intent of division
of work is to produce more and better work
for the same effort
● Work is divided into small tasks/jobs.
● Results in efficient and effective output
● It is applicable to all kinds of work,
managerial as well as technical
● Positive effects of the principle: Specialisation , Improves
efficiency.
● If violated: No specialization, Lack of efficiency, Chances of
duplication of work

● Eg. In furniture manufacturing company one person can be

asked to cut the wood pieces, one to join them, one to polish, one
to give finishing touch to furniture. With this division each
person will become specialised in his part of job and his
effectiveness and efficiency improves.
● Eg. A company has separate departments:
finance, marketing, production etc.

● Eg. Applicable in hospital or a government

office.
AUTHORITY & RESPONSIBILITY

Authority:It means right to issue

commands and obtain obedience

Responsibility:It means obligation for the

performance of the job assigned
There are two types of authority:
● Formal (official, because of position).
● Informal (personal, because of
qualities )
PARITY OF AUTHORITY AND
RESPONSIBILITY
● There should be a balance between authority and
responsibility. Responsibility is the corollary of authority
● Managers require authority commensurate( in proportion)
with their responsibility
● Authority > Responsibility = Irresponsible
Behavior (misuse)
● Responsibility < Authority= Ineffective
Positive effects of the principle: No misuse of power,
Completion of task on time
If violated: Delay in work, misuse of authority

Eg. If a person is given responsibility to produce 100 units in one

week;s time but he is not given authority to purchase the raw
materials. If there is no raw material available in the store-room ,
he will not be able to complete the target of producing 100 units on
time. The worker cannot be blamed for not completing on time
because he was given only the responsibility and not the matching
authority to carry on the work .

Eg. If a person is given responsibility to produce 100 units in one

week time but he is given authority to purchase the raw materials
which could produce 200 units. The person will misuse the
authority.
(OR Eg. from NCERT)
UNITY OF COMMAND
●Each worker should have only one boss
with no other conflicting lines of
command
●Each participant in a formal organisation
should receive orders from and be
responsible to only one superior
● A subordinate should receive orders and be
accountable to only one boss at a time
● A subordinate should not receive instructions
from more than one person
● Dual subordination should be avoided which
prevents confusion regarding tasks to be done
Positive effects of the principle: Prevents confusion, Improves
efficiency,
If violated: Subordinate will give excuse and will try to escape from
responsibility. Also authority will weaken and there will be difficulty
in maintaining discipline.

Eg. If employee of production department is asked to go slow in

production to maintain quality standard by the production in-charge.
But the sales in-charge instructs the employee to accelerate the
production to meet the pending orders. In this situation employee will
get confused as to whose instructions must be followed by him.

Eg. 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.
In this situation employee will get confused as to whose instructions
must be followed by him.
 UNITY OF DIRECTION
● People engaged in the same kind of activities must have
the same objectives in a single plan.
● One head one plan

● Related activities should be grouped together

● Efforts of all the members of the organization should

be directed towards common goal. It ensures unity of

action and coordination.

Positive effects of the principle: ]It ensures unity of action and
unified efforts.
If violated: It will lead to lack of coordination and difficulty in
achieving goals.

Eg. If an organisation is producing different lines of products —

cosmetics, medicines and confectionery item. Each product has its
own market and its own business environment. Each division must
plan its target and every employee of that division must put his
efforts towards the achievement of plan of their division under the
direction of one head only.

Eg. 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.
ORDER
According to Fayol, “People and materials must be
in suitable places at appropriate time
● A place for everything (everyone) and
everything (everyone) in its (her/his) place.
● Arrangement of things is called material order
● Placement of people is called social order.
● If there is a fixed place for everything then there
will be no hindrance in the activities of business/
factory. This will lead to increased productivity
and efficiency.
Positive effects of the principle: no wastage of time, smooth
working, increased productivity
If violated: wastage of time searching for men and material,
hindrance in the activities
Eg. For the Head of a Sales Department a cabin is allotted, for
typist a single table and for a foreman a proper area should be
allotted to supervise the workers.

Eg. if a worker is in need of a tool he must know in which box

or tool-room it will be found and if he needs guidance from
supervisor he must know the fixed cabin of supervisor. If no
fixed place is given then worker will waste his time and energy
in search of tools or supervisor.
 Discipline
● Obedience to organisational rules and employment
agreement which are necessary for the working of the
organisation. Sincerity, Obedience, Respect of Authority &
Observance of Rules and Regulations of the Enterprise
● Discipline requires- Good superiors, Clear & fair
agreements with workers, judicious application of penalties
● Positive effects of the principle: Systematic working,
improves efficiency
● If violated: Confusion and chaos, wastage of resources

● Eg. 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. The employees must honour their
commitments towards the organisation by working
effectively and efficiently. On the other hand, superiors
must also meet their commitments by meeting their
promises of increments, promotions, wage revisions etc.
 INITIATIVE
● Initiative means taking the first step with self-motivation. It is
thinking out and executing the plan

● Initiate actions without being asked to do

● Management should provide opportunity to its employees

● Helps in developing an atmosphere of trust
● It does not mean going against the established practices of the
company for the sake of being different

● Employee suggestion system should be there and employees

should be rewarded for useful suggestions.
 Positive effects of the principle: feeling of belongingness,
motivation
If violated: demotivation, employees will not give their
best
Eg. Before setting up of a plan the manager must
welcome the suggestions and ideas of employees to allow
their maximum participation. But once the plan is made
every employee must follow it and implement it.
 REMUNERATION
★ It states that the Payment made to the workers should be
fair to both employees and the organisation
★ It should be just and equitable
★ It will ensure congenial atmosphere and good relations
between workers and management
★ Factors affecting remuneration paid:
★ a reasonable standard of living,
★ within the paying capacity of the company,
★ competitors,
★ government acts,
★ cost of living
Positive effects of the principle: employees motivated,
commitment of employees
If violated: labour turnover will increase, demotivation
Eg. if in a particular year the organisation has earned
more profit than apart from giving extra profit to
shareholders and owners, some part of profit must be
given to employees also in the form of bonus. This will
encourage and motivate to put more efforts and increase
the profit of the company.
STABILITY OF TENURE OF PERSONNEL
●An insecure tenure and a high rate of
employee turnover will affect the
organization adversely
●Employees work better if job security and
career progress are assured to them
● Employees should not be moved
frequently from one job position to another
● Time is required for an employee to get
used to a new work .
● Money spent on training the worker will
go waste.
● Stability of job creates team spirit & a
sense of belongingness among workers
Positive effects of the principle: Labour turnover
will be less, improve efficiency
If violated: Adhocism will increase instability and
insecurity, selection and training cost will increase.

Eg. Rekha, a manager of Solutions Ltd, recruited

twenty new employees. She kept them in an
organisation for a period of one year so that the
employees become familiar with their jobs and can
contribute their best fro realization of their goals.
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”
● The chain of superiors ranging from the
ultimate authority to the lowest
● Every orders, instructions etc. has to pass
through Scalar chain
● For the sake of convenience & urgency, this
path can be cut this short cut -Gang Plank
Positive effects of the principle: systematic flow of
communication, no communication gap
If violated: delay in decision making, fixing responsibility difficult

Eg. There is one head ‘A’ who has two lines of authority under her/
him. One line consists of B-CD-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.

Eg. If E wants to pass some urgent information to О then instead of

following the long route of scalar chain, he can directly
communicate with О by constructing a gang-plank, but no
gang-plank can be constructed between the people working at
different levels, i.e., no gang plank between D and L. In an
emergency it can be possible that a worker can contact CEO
directly.
SUBORDINATION OF INDIVIDUAL INTEREST
● The interests of an organisation should take priority over the
interests of any one individual employee according to Fayol
● In case of any conflict between organisational interest and
individual interest- organisational interest should prevail
● A manager can ensure this by her/his exemplary behaviour
● 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
● Every worker has some individual interest for working in a
company. The company has got its own objectives
Positive effects of the principle: coordination, increase respect
for superior in the eyes of subordinates
If violated: No achievement of organizational goals,
subordinates will do same and organization will suffer

Eg. if individual’s objective is to earn more remuneration and

organisation is going through the situation of financial crisis and
has the objective of cutting down the expenses. In this situation the
individual must sacrifice his interest as when organisation will
come out from financial crisis then he can achieve his objective.
Esprit De Corps
● It refers to team spirit and harmony among
employees, according to Fayol
● Inspires workers to work harder
● Replace ‘I’ with ‘We’ in all the conversations
● It will give rise to a spirit of mutual trust and
belongingness among team members
● It will also minimise the need for using penalties
Positive effects of the principle: Give rise in spirit of mutual
trust, minimize need of penalties,
If violated: Objectives will not be achieved, loss of coordination

For example, If the production manager assigns a target of

manufacturing 100 units to a group of 10 members, who divide
the target among themselves to produce 10 units each, principle
of Esprit De Corps(-team spirit )says that each member of the
group should not concentrate only on achieving his individual
target of 10 units but they must concentrate on achieving group
target of 100 units. So if two workers of that group fall sick, then
the other eight members must divide their individual target
among themselves and try to achieve the target of their group.
 CENTRALIZATION
(OR DECENTRALIZATION)
● Centralization is concentration of authority at the top level and
Decentralization means disposal of decision making authority to
all the levels of the organization
● Fayol said there should be a balance between the two.
● This is a matter of degree depending on the condition of the
business and the quality of its personnel. The important decisions
should be centralised and daily decisions should be
decentralised
● Increases the role of subordinate is decentralization & Decreases
the role of subordinate is centralization
 Factors affecting Centralisation and
Decentralisation:
● Size: A small organisation can be well organised
and managed with centralised technique but in
large organisation there is need for decentralisation.
● Type of employees: If employees are efficient and
competent then they can be trusted by having
decentralisation but if employees are not fully
developed then there must be centralisation.
Positive effects of the principle:
Decentralisation; Fast decisions at operational level
Centralisation: Cost saving
If violated: (a) Complete centralisation will result in delay in
decision.
(b) Complete decentralisation will result in misuse of authority

Eg. In a decentralised company the major decisions and

activities of setting up organisational goals, plans, policies, and
strategies are carried out by Top Level but Department
Managers carry out the routine work such as purchase of raw
materials, fixing targets of workers etc.
 EQUITY
● Equity refers to kind, fair and just treatment to
employees
● Employees will put their maximum efforts only
when they are treated with kindness and justice
● If a manager is biased in dealing with employees
then employees will get dissatisfied and will not
contribute to their maximum capacity
● Will ensure loyalty and devotion
● No discrimination against anyone on account of
sex, religion, language, caste, belief or
nationality etc
● Positive effects of the principle: Motivated employees,
satisfied employees
● If violated: increased turnover, unhealthy relations,
dissatisfaction of employees
Eg. The rules for granting medical leave to an employee
should be same irrespective of their position, grade or
gender.
Eg. Indian American Sunder Pichai took over as
Google's CEO on Oct. 2, 2015.