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10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

14 Fundamental
Principles of
Formulated by Henry
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Different management experts have explained

different principles on the basis of their research.
Henry Fayol, a famous industrialist of France, has
described fourteen principles of management in his
book General and Industrial Management.

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Explaining the difference between principles and

elements he makes it clear that the principles of
management are fundamentally true and establish a 1/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

relationship between cause and effect, while the

elements of management point towards its functions.


While presenting the principles of management Fayol

has kept two things in mind. Firstly, the list of the
principles of management should not be long but
should be suggestive and only those principles should
be explained which become applicable in most of the

Secondly, the principles of management should be

flexible and not rigid so that changes can be made in
them in case of need. The fourteen principles given by
Fayol are as under:

(1) Division of Work:

This principle of Fayol tells us that as far as possible

the whole work should be divided into different parts
and each individual should be assigned only one part
of the work according to his ability and taste rather
than giving the whole work to one person. 2/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol


When a particular individual performs the same job

repeatedly, he will become an expert in doing that
particular part of the whole job. Consequently, the
benefits of specialisation will become available.

For example, a furniture manufacturer gets an order

for manufacturing 100 lecture stands. He has five
workers who will do the job. There are two ways to
complete this order. First, every worker should be
asked to complete 20 lecture stands.

The second method can be distributing different parts

of the lecture stand-legs, top board, centre support,
assembling and polishing-to all the five workers in a
manner that only one worker does the same job for all
the 100 lecture stands. Here, Fayols indication is to the
second way to do this job and not the former one.

The principle of division of labour applies not only to

the workers but also equally to the managers. For
example, if a manager is tuned to work on the same
kind of activities for a long period of time, he will
certainly be an expert in his particular job.
Consequently, more and beneficial decisions can be
taken in a comparatively less time by him.

10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

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Positive Effect advantages of specialisation are

obtained, such as increase in the quality of work,
increase in the speed of production, decrease in the
wastage of resources.

Violating Effect the above-mentioned positive effects

of specialisation will not be available.

(2) Authority and Responsibility:

According to this principle, authority and

responsibility should go hand in hand. It means that
when a particular individual is given a particular
work and he is made responsible for the results, this
can be possible only when he is given sufficient
authority to discharge his responsibility.


It is not proper to make a person responsible for any

work in the absence of authority. In the words of
Fayol, The result of authority is responsibility. It is the
natural result of authority and essentially another
aspect of authority and whenever authority is used,
responsibility are automatically born. 4/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

For example, the CEO of a company has doubled the

sales target of the sales manager for the coming year.
To achieve this target, authority for appointing
necessary sales representatives, advertising according
to the need, etc. shall have to be allowed. In case these
things are not allowed the sales manager cannot be
held responsible for not

(3) Discipline:

Discipline is essential for any successful work

performance. Fayol considers discipline to mean
obedience, respect for authority, and observance of
established rules.

Discipline can be established by providing good

supervision at all levels, clearly explaining the rules,
and implementing a system of reward and
punishment. A manager can present a good example
to his subordinates by disciplining himself.

For example, if the employees break their promise of

working up to their full capacity, it will amount to the
violation of obedience. Similarly a sales manager has
the authority to do business on credit.

But in case he allows this facility not to the general

customers but only to his relatives and friends, then it
will amount to ignoring his respect to his authority.
(Note: Both these examples give a message of
indiscipline which is an undesirable situation.)

(4) Unity of Command: 5/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

According to the principle of unity of command, an

individual employee should receive orders from only
one superior at a time and that employee should be
answerable only to that superior. If there are many
superiors giving orders to the same employee, he will
not be able to decide as to which order is to be given
priority. He thus finds himself in a confused situation.

Such a situation adversely affects the efficiency of the

subordinates. On the other hand, when there are
many superiors, every superior would like his orders
to be given priority. This ego problem creates a
possibility of clash. Consequently, their own efficiency
is likely to be affected.

(5) Unity of Direction:

Unity of direction means that there should be one

head for one plan for a group of activities having the
same objective. In other words, there should be one
plan of action for a group of activities having the same
objective and there should be one manager to control

For example, suppose an automobile company is

manufacturing two products, namely, scooters and
cars, hence having two divisions.

As each product has its own markets and problems

therefore each division must have its own targets.
Now each division must plan its target as per its
environmental conditions to get better results. It is
necessary to distinguish between the meaning of the
unity of command and the unity of direction. 6/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

Unity of command means that there should be only

one manager at a time to give command to an
employee, while the unity of direction means that
there should be only one manager exercising control
over all the activities having the same objective.

Unity of Command & Unity of Direction

In this connection Fayol feels that for the efficient

running of an organisation the unity of direction is
important, while the unity of command is important to
enhance the efficiency of the employees.

(6) Subordination of Individual Interest to General


This principle can be named Priority to General

Interest over Individual Interest. According to this
principle, the general interest or the interest of the
organisation is above everything. If one is asked to
place individual interest and the general interest in
order of priority, definitely the general interest will be
placed at the first place.

For example, if a manager takes some decision which

harms him personally but results in a great profit to
the company, he should certainly give priority to the
interest of the company and take the decision
accordingly. On the contrary, if some decision helps
the manager personally but results in a great loss to
the company, then such a decision should never be

For example, a purchase manager of a company has to

purchase 100 tonnes of raw material. His son happens 7/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

to be a supplier along with other suppliers in the

market. The manager purchases the raw material
from the firm of his son at a rate higher than the
market rate. This will profit the manager personally,
but the company will incur heavy loss. This situation is

(7) Remuneration to Employees:

Fayol is of the opinion that the employees should get a

fair remuneration so that the employees and the
owners find equal amount of satisfaction. It is the duty
of the manager to ensure that employees are being
paid remuneration according to their work. If,
however, they are not paid properly for their work,
they will not do their work with perfect dedication,
honesty and capacity.

As a result, the organisation shall have to face failure.

Proper remuneration depends on some factors like the
cost of living, demand of labour and their ability. Fayol
feels that in order to motivate the employees, apart
from general remuneration, they should be given
some monetary and non-monetary incentives.

For example, suppose that the things are getting

dearer and dearer and the company is getting good
profits. In such a situation, the remuneration of the
employees should be increased even without their
asking. If this is not done, the employees will leave the
company at the first opportunity. Expenses shall have
to be incurred on new recruitment which shall bring
loss to the company.

(8) Centralisation and Decentralisation: 8/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

According to this principle, the superiors should adopt

effective centralisation instead of complete
centralisation and complete decentralisation. By
effective centralisation, Fayol does not mean that
authority should be completely centralised.

He feels that the superiors should keep the authority

of taking important decisions in their own hands,
while the authority to take daily decisions and
decisions of less importance should be delegated to the

The ratio of centralisation and decentralisation can

differ in different situations. For example, it is
advantageous to have more centralisation in a small
business unit and more decentralisation in a big
business unit.

For example, the decisions in respect of determining

the objectives and policies, expansion of business, etc.
should remain in the hands of the superiors. On the
other hand, authority for the purchase of raw
material, granting leave to the employees, etc. should
be delegated to the subordinates.

Positive Effect

(i) Decrease in the workload of superiors

(ii) Better and quick decisions

(iii) Increase in the encouragement to the subordinates

Violating Effect 9/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

(i) Unnecessary increase in the workload of the

superiors in case of centralisation and of the
subordinates in case of decentralisation

(ii) Impatient and wrong decisions by the superiors in

case of complete centralisation and weak decisions by
the subordinates in case of complete decentralisation

(iii) Decline in the encouragement to subordinates in

case of complete centralisation

(9) Scalar Chain:

(i) Meaning of Scalar Chain:

It refers to a formal line of authority which moves

from highest to the lowest ranks in a straight line,

(ii) Fayols Opinion:

This chain must be followed in a strict manner. It

means each communication must move from top to
bottom and vice versa in a straight line. The important
condition here is that no step (post) should be
overlooked during communication.

(iii) Fayols Ladder:

Fayol has explained this principle with the help of a


For example, in a company the employee F wants to

have contact with the employee P. According to the
principle of scalar chain F shall have to reach A
through the medium of E,D,C,B and then having
contact with L,M,N,0 shall reach P. Thus F shall have 10/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

to take the help of all the nine steps (posts) to have

business contact with P.

(iv) Utility:

Due to more clear system of authority and

communication, problems can be solved faster.

(v) Gang Plank:

It is the exception of the principle of scalar chain. This

concept was developed to establish a direct contact
with the employee of equal rank in case of emergency
to avoid delay in communication.

For example, as shown in the diagram employee F

can have direct contact with employee P. But for
doing so employees F and P shall have to seek the
prior permission of their immediate bosses E and O.
The details of their talk also shall have to be given to

(10) Order:

According to the principle of order, a right person

should be placed at the right job and a right thing
should be placed at the right place. According to Fayol,
every enterprise should have two different orders-
Material Order for Physical Resources and Social
Order for Human Resources.

Keeping the physical resources in order means that a

proper place for everything and everything in its right
place. Similarly, keeping the human resources in
order means a place for everyone and everyone in his
appointed place. 11/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

Maintaining these two orders properly will ensure

that everybody knows his workplace, what he is to do
and from where he would get his required material.
Consequently, all the available resources in the
organisation will be utilised properly.

Gang Plank: A Special Note

Gang Plank can only be established with the

employees of the equal or same level. For example, in
the present example no gang plank can be established
between F and O.

For example, an employee working in a factory should

know the place or source from where he can get his
tools in case of need. Similarly, he should know the
place where his supervisor will be available in case of
any need.

It is, however, important to note that it is not sufficient

to have an allotted place for a toolbox and for the
supervisor but the availability of both at their decided
place is absolutely important. If this is not the case, it
can lead to a heavy loss as a result of damage to the

(11) Equity:

This principle tells that the managers should treat

their subordinates in a just and kind manner so that
they develop a feeling of dedication and attachment
for their work. All the employees should be treated
equally and impartially. 12/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

Fayol tells us in connection with this principle that

there should not be any equality of treatment between
a person whose work is really good and a person who
is a shirker by nature.

Rather, the latter should be treated sternly. Doing so

would be equitable. It is because of this point of view
that Taylor has presented his differential
remuneration method.

(12) Stability of Personnel:

From the point of view of management it is absolutely

harmful to change the employees frequently as it is a
reflection of inefficient management. Therefore,
according to this principle there should be stability of
tenure of the employees so that the work continues

Fayol thinks that instability in the tenure of employees

is a cause of poor management and results. High rate
of labour turnover will result in increased expenses
because of selecting them time and again, and giving
them training afresh.

It also lowers the prestige of the organisation and

creates a feeling of insecurity among the employees
which keeps them busy in finding out new avenues of
work. Consequently, the sense of dedication cannot be
created among them.

For example, it is true that if the workers in a company

are not treated well and the atmosphere in the
company is also unhealthy, the employees will not stay
for a long time. In other words, they will leave the 13/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

company at the first opportunity available. This

situation is absolutely harmful.

For example, a labourer completes 10 units of goods in

a day. Another labourer who happens to be a relative
of the supervisor completes 8 units but both get equal
remuneration. This violates the principles of equality.
The second labourer should get less remuneration
than the first one.

(13) Initiative:

Initiative means the capacity to work while expressing

ones thoughts. According to Fayol, it is the duty of the
manager to encourage the feeling of initiative among
his employees for doing some work or taking some
decision but within the limits of authority and

It will be possible only when the manager will

welcome the thoughts of his/her subordinates. By
doing so the subordinates will present new and useful
ideas time and again and gradually they will become
an integral part of the organisation. In order to make
this process a success a manager will have to abandon
his false sense of prestige.

For example, a salesman suggests to his sales manager

to implement a new advertisement technique. The
sales manager sends him away by telling him that it is
not possible and ignores the suggestion altogether.

In such a situation the salesman, who has been

admonished and belittled, will never venture to offer 14/17
10/13/2017 14 Fundamental Principles of Management Formulated by Henry Fayol

any suggestion in future because his desire of taking

initiative has been suppressed.

On the contrary, if his suggestion had been listened to

carefully (even though not to be implemented) he
could have taken the courage to offer some suggestion
in future. Such an action would simply have
encouraged his initiative.

Positive Effect

(i) Increase in the thinking power of the employees

(ii) Cooperation of the employees in implementing


(iii) Increase in the sense of attachment to the

organisation Violating Effect

(iv) Decline in the thinking power of the employees

(v) An atmosphere of non-cooperation

(vi) Decline in the employees attachment to the


(14) Esprit de corps:

As per this principle, a manager should continuously

make efforts to develop a team spirit among the
subordinates. To do this, he/she should use the word
We instead of during the conversation with
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