Ch – 2 Principles of Management

Nature of Principles of Management

1. General guidelines: The principles of management are guidelines to action but do not provide
readymade solutions to all managerial problems since real business situations are very complex and
dynamic and are a result of many factors.
2. Formed by practice and experimentation: The principles of management are derived by
observation, experimentation and personal experience of managers.
3. Universal applicability: The principles of management apply to all types of organisations, at all
levels and at all times.
4. Flexible: They are not rigid but are flexible and can be modified by the manager when the situation so
demands.
5. Contingent: The application of principles of management is contingent or dependent upon the
prevailing situation at a particular point of time.
6. Mainly behavioural: Management principles aim at influencing behaviour of human beings.
7. Cause and effect relationships: The principles of management establish cause and effect relationship
so that they can be used in similar situations in a large number of cases.
Significance of Management Principles
1. They provide the managers with useful insights into reality. They add to their knowledge, ability
and understanding of managerial situations and circumstances.
2. They help in optimum utilisation of resources as the wastages associated with trial and error
approach can be overcome. They help in effective administration as the decisions are free from
personal bias.
3. They help managers in taking scientific decisions as they are based on objective assessment of the
situation and emphasise on logic rather than blind faith.
4. They help in meeting changing environment requirements as they can be modified according to
the needs of the environment.
5. They help in fulfilling social responsibility by responding to the demands of the public.
6. They are used as a basis for management training, education and research by providing the basic
groundwork for the development of management as a discipline.
Fayol’s Principles of Management
1. Division of work: The principle of Division of work states that work is divided into small
tasks/jobs.A trained specialist who is competent is required to perform each job. Thus, division of
work leads to specialisation and results in efficient and effective output.

2. Authority and Responsibility: There should be a balance between authority and responsibility. An
organisation should build safeguards against abuse of managerial power. At the same time, the
manager should have the necessary authority to carry out his responsibility. The manager should
have the right to punish a subordinate for not obeying orders but only after sufficient opportunity
has been given to him/her for presenting his /her case.

3. Discipline: It is the obedience to organizational rules and employment agreement which are
necessary for the working of the organization. It requires good superiors at all levels, clear and
fair agreement and judicious application of penalties. Workers and management both should
honour their commitments towards one another without prejudice.

4. Unity of command: The principle of unity of command states that each employee in an
organisation should receive orders from one superior only and he should be responsible to only one
superior. It prevents confusion regarding tasks to be done. Fayol felt that if this principle is violated
“authority is undermined, discipline is in jeopardy, order disturbed and stability threatened.” (This
principle resembles military organisation.)
Aim: It prevents dual subordination.
Implications: It affects an individual employee
5. Unity of Direction: Unity of direction states that all the units of an organisation should be moving
towards the same objectives through coordinated and focused efforts. Each group of activities
having the same objective must have one head and one plan. This ensures unity of action and
coordination.
Aim: It prevents overlapping of activities.
Implications: It affects the entire organisation

6. Subordination of individual interest to general interest: The interests of an organisation should take
priority over the interests of any individual employee.The larger interests of the workers and stakeholders
are more important than the interest of any one person.

7. Remuneration of employees: It states that the remuneration of employees should be just and
equitable.Employees should be paid fair wages, which should give them at least a reasonable
standard of living. At the same time it should be within the paying capacity of the company. This will
ensure good relations between workers and management.

8. Centralisation and Decentralisation: The concentration of decision-making authority by the top

management is called centralisation whereas its dispersal among more than one person is known as
decentralisation.In general, large organisations have more decentralisation than small
organisations.According to Fayol, “There is a need to balance subordinate involvement through
decentralisation with managers’ retention of final authority through centralisation.”
9. Scalar chain: It refers to chain of authority and communication that runs from top to bottom and
should be followed by the managers and the subordinates.It facilitates smooth flow of
communication and unity of command in the organisation. This chain should not be violated in the
normal course of formal communication. However, in case of any emergency, a shorter route named
‘gang plank’ may be used to avoid delay in communication.
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10. Order:It states that there should be a place for everything and everyone in an organization and
that thing or person should be found in its allotted place.People and materials must be in suitable
places at appropriate time for maximum efficiency. This will lead to increased productivity and
efficiency.

11. Equity: Equity states that there should be no discrimination against anyone on account of sex,
religion, language, caste, belief, nationality etc. It emphasises kindliness and justice in the
behaviour of managers towards the workers. This will ensure loyalty and devotion.

12. Stability of personnel: “Employee turnover should be minimized to maintain organizational

efficiency” according to Fayol. 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 be given reasonable time to show results. Instability will create insecurity
among employees, so they will tend to leave to organisation. Recruitment, selection and training
cost of new employees will be high.
13. Initiative: Initiative means thinking out and executing the plan within the prescribed limits of
authority. It states that the workers should be encouraged to develop and carry out their plans for
improvement in the organisation. A good company should have an employee suggestion system
whereby initiative/suggestions which result in substantial cost/ time reduction should be
rewarded.

14. Esprit de Corps: It states that management should promote a team spirit of unity and harmony
among employees to realise organisational objectives. Otherwise, it will result in a loss of
 coordination. A manager should replace ‘I’ with ‘We’ in all his conversations with workers to foster
team spirit. This will give rise to a spirit of mutual trust and belongingness among team
members.It will also minimise the need for using penalties.

Taylor’s Scientific Management: Principles and Techniques

Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.

Principles of Scientific Management

1. Science not rule of thumb: It states that there is only one best method to maximise efficiency.This
method can be developed through scientific study and analysis of each element of a job and should
substitute ‘Rule of Thumb’. · This standard method then should be followed throughout the
organisation.
2. Harmony Not Discord: The principle emphasizes that there should be complete harmony between
the management and the workers. Management should share gains of the company if any with the
workers and workers should work hard and be wiling to embrace change for the good of the company.
This requires ‘Mental revolution’ on the part of both management and workers. Both management and
the workers should transform their thinking. Mental revolution involves a change in the attitude of
workers and management towards one another from competition to cooperation. Both should realise
that they require one another. Both should aim to increase the size of surplus.
3.Cooperation, not individualism: There should be complete cooperation between the management
and the workers instead of individualism. This principle is an extension of principle of ‘Harmony, Not
Discord’. Competition should be replaced by cooperation. According to Taylor, there should be an
almost equal division of work and responsibility between workers and management. The management
should work almost side by side with the workers helping, encouraging and smoothing the way for
them. For all important decisions taken by the management, workers should be taken into confidence.
The management should be open to any constructive suggestions made by the employees and
suitably reward them.

4. Development of each and every person to his/ her greatest efficiency and prosperity: This principle
is concerned with efficiency of employees which could be built in right from the process of employee
selection. The work assigned to employees should suit their capabilities. They should be given the
required training to increase their efficiency. Efficient employees would produce more and earn more.
This will ensure their greatest efficiency and prosperity for both the company and the workers.

Techniques of Scientific Management

1. Functional Foremanship: Functional foremanship is a technique which aims to improve the quality of
supervision at shop floor. Taylor identified a list of qualities of a good foreman or a supervisor. Since all
the qualities could not be found in a single person, Taylor proposed eight specialists. In this technique,
planning is separated from execution. It is an extension of the principle of division of work and
specilaisation. Taylor suggested four foremen for planning and four foremen for execution.
{The diagram in the textbook to be drawn}
The four foremen for planning and their role:
Instruction card clerk: To draft instructions for the workers. Route clerk: To specify the route of
production. Time and cost clerk: To prepare time and cost sheet. Disciplinarian: To ensure discipline.
The four foremen for execution and their role:
Speed boss: To be responsible for timely and accurate completion of the job. Gang boss: To keep
machines and tools ready for operation by the workers. Repair boss: To ensure proper working
conditions of machines and tools. Inspector: To checking the quality of work.

2. Standardisation and simplification of work: Standardisation is the process of setting standards for
every business activity. These standards are benchmarks which must be adhered during production
process. The standards were set for every business activity – standardisation of process, raw material,
time, etc.
The objectives of standardisation of work are: To reduce a given line or product to fixed types, sizes and
characteristics.
⚫ To establish standards of excellence and quality in materials.

⚫ To establish standards of performance of men and machines .

⚫ To establish interchange ability of manufactured parts and products.

 Simplification of Work is a technique to eliminate superfluous varieties, sizes and dimensions of
products. It leads to reduced inventories, fuller utilization of equipment and increased turnover to
reduce costs.
1. Method Study: The objective of method study is to find the one best way of doing the work. It helps
to minimize the cost of production, improve the quality and maximize satisfaction of the customer. It
includes all activities from procurement of raw materials till the final product is delivered to the
customer.
2. Motion Study: It is a technique to study the movements like lifting, putting objects, sitting & changing
positions etc. which are undertaken while doing a well defined job.The movement could be
productive, incidental and unproductive. Motion study seeks to eliminate unnecessary and wasteful
movements so that it takes less time to complete a job efficiently.
3. Time Study: It is a technique to determine the standard time taken by a worker of reasonable skill and
efficiency to perform a well-defined job. The objective of time study is to determine the number of
workers to be employed, frame suitable incentive schemes and determine labour costs.

4. Fatigue study: A person is bound to feel tired physically and mentally if he/she does not rest while
working. The rest intervals will help one to regain stamina and work again with the same capacity.
This will result in increased productivity. Fatigue study seeks to determine the amount and frequency
of rest intervals in completing a task.

5. Differential piece wage system:It is a technique which differentiates between efficient and less
efficient workers. It rewards the efficient workers and motivates the less efficient ones to improve
their efficiency. In this plan, there are two piece rates – one for those workers who produce the
standard output or more, and the other for those who produce less than the standard output.
Example: Standard output (per worker per day) = 100 units. Wage rate I = Rs4 per unit (for output >=
100 units) Wage rate II = Rs 3 per unit (for output < 100 units). Worker A produced 101 units and
Worker B 99 units. Total wages of Worker A = 101 × 4 = Rs404 and of Worker B = 99 × 3 =Rs297.
Difference in units produced = 2 ; Difference in wages = `107.
According to Taylor, this loss of Rs107 should be enough for the inefficient worker (worker B) to be
motivated to perform better.

Fayol versus Taylor– A Comparison

Fayol’s and Taylor’s contributions are complementary to each other.
However, the differences between their contributions are:
BASIS HENRI FAYOL F.W. TAYLOR
Perspective Top level of management Shop floor level of a factory

Basis of Personal experience Observations and experimentation

formation
Focus Improving overall administration Increasing productivity

Unity of Fayol strongly propounded unity of Taylor did not feel that it is important as under
Command command, functional foremanship a worker received orders from
i.e. dual subordination should be eight specialists.
avoided.

Applicability Applicable universally Applicable to specialised situations

Expression General Theory of Administration Scientific Management

Personality Practitioner Scientist

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