CHAPTER - II

PRINCIPLES OF MANAGEMENT
A principle is a basic statement that provides understanding and guidance to thinking and action.
Management principles are statements of fundamental truths that provide guidelines for managerial
decision making and action. Management principles are defined as the guiding rules or laws for
managerial action. These are fundamental truth of general validity.
Principles of Management by Henry Fayol (1841-1925)
Henry Fayol is considered as father of general management. He was a French industrialist.
According to him, principles of management are flexible and not absolute.
1. Division of Work
Work is divided into small tasks and is assigned to each individual worker according to his
ability and qualification. Division of work makes task simpler and leads to specialization.
2. Authority and Responsibility
According to this principle, authority and responsibility should go hand in hand ie there should
be a balance between authority and responsibility. Authority is the right to give orders and instruction
and the power to get them executed. Responsibility means the obligation to complete the job assigned
as desired by the authority.
3. Discipline
Discipline means obedience to the rules and regulations of the organization and respect to
authority. It must be followed by the employees and personnel at all levels of management.
4. Unity of Command (One man one boss)
According to this principle, an employee should get the orders and instructions from only one
superior at a time. It helps to avoid confusion and delay and to maintain discipline in the organization.
5. Unity of Direction (One unit, one plan, one head)
Each group having the same objective must have one head and one plan. This ensures unity of
action and co-ordination.
6. Subordination of Individual Interest to the General Interest
Interest of an organization should take priority over the interest of any individual employee. The
interest of the organization should never be sacrificed to satisfy the individual interest.

7. Remuneration of Employees
Remuneration should be just fair and equitable. It should act as a source of satisfaction and
means of motivation. It should be within the paying capacity of the company.
8. Centralization and Decentralization
The concentration of decision making authority is called centralization where as its dispersal
among various levels are known as decentralization. Fayol advised that there should be a balance
between centralization and decentralization.
9. Scalar Chain – (Chain of Command and Chain Communication)
The formal lines of authority from highest to lowest ranks are known as scalar chain. The chain
shows its relation between the superiors and the lower ranked employees.
Fayol insists that the communication should always be through this chain.
Scalar chain has the following drawbacks
1. Time consuming (delay)
2. Distortion of messages
To overcome these drawbacks Fayol suggest ‘gang plank’ which permits two officers of the
same level to communicate with each other.

10. Order
The principle of order states that a place for everything (everyone) and everything (everyone) in its
(his/her) place. This will lead to increased productivity and efficiency.
11. Equity
The management should treat all the employees of the institution without any discrimination.
This will ensure loyalty and devotion.
12. Stability of Personnel
Employees should not be shifted from their position frequently. This helps them to work with
self confidence. It will reduce employee turnover.
13. Initiatives
Initiative means taking the first step with self-motivation.
It means eagerness to start action without asking to do so. This can be achieved by giving a
chance to the employees in the decision making process of the organization.
14. Espirit De corps (Team Spirit) - Union is Strength
This is based on the general truth that ‘union is strength’. This will give rise to a spirit of mutual
trust and belongingness among team members (extension of unity of direction).

Difference between Unity of Command and Unity of Direction

Unity of Command Unity of Direction

One subordinate should receive orders Each group of activities having same
from and be responsible to one superior objective must have one head and one
plan
Its aim is to prevent dual Its aim is to prevent overlapping of
subordination. activities.

It affects an individual employee It affects the entire organization

Principle Positive Effect Negative Effect

Division of works Leads to specialization Lack of Efficiency
Improve efficiency No specialization
Authority and No misused of authorities Delay in work completion
Responsibility Meeting responsibility on Misuse of authority
time
Discipline Improve efficiency Disorder, confusion and chaos
Systematic working in the (complete disorder)
organization Wastage of resources
Delay in work
Unity of Command No confusion in the mind of Confusion in the mind of
subordinate employees
no clashes Ego clash among superiors
Improve efficiency Difficulty in achieving
organizational goals

Centralization v/s Fast decision at department Complete centralization result in delay,

Decentralization level and strict control over load, dissatisfaction etc.
Benefit of both Complete decentralization leads to
anarchy
Remuneration Employees get motivated Increase in employee turnover
Initiative and commitment Dissatisfaction among employee
among employees

Scalar chain Systematic flow of information Communication gap

Maintain discipline and Unity of No clarity in authority responsibility
command relationship
Order No wastage of time Wastage of time in search of men and
Smooth and systematic working material
May lead to indiscipline
Equity Employees get satisfied Dissatisfaction in employees
Motivate the employees and Increase in labour turnover
boost up their morale Unhealthy relations
Stability of Tenure Improve efficiency level Wastage of resources in learning new
Employee satisfaction job
Dissatisfaction among employees
Initiative Develop feeling of Employees work below their capacity
belongingness in employees De motivation among employees
Healthy relation Satisfaction
and completion of job on time
Espirit De corps Development of team spirit Team goal may not be achieved
Achievement of group goal No team spirit
Stress on individualism

** Scientific Management ** (F. W. TAYLOR)

Scientific management means applying scientific tools, method and trained personnel in order to
increase the output.
Principles of scientific management
1. Scientific methods not Rule of Thumb
Taylor advocated that traditional rule of thumb method should be replaced with scientific methods. At
every stage of work scientific methods should be adopted. This is the basic principle of scientific
management
2. Harmony, not discord
This principle emphasized that there should be complete harmony between management and workers.
To achieve this state, there should be a revolutionary change in the attitude of both workers and
managers. Taylor called it as ‘mental revolution’.
3. Co-operation, not individualism
This principle is an extension of principle of harmony, not discord. There should be complete
cooperation between labour and management instead of individualism. Both should realize that they
need each other.
4. Development of each and every person to his/her greatest efficiency and prosperity
Industrial efficiency depends upon the efficiency of workers. Employees should be scientifically
selected. Work should be assigned to each to suit his physical, mental and intellectual capabilities.
Employees should be sent for training from time to update their knowledge. This will ensure greatest
efficiency and prosperity for both workers and management.
Techniques of Scientific Management
1. Functional Foremanship
To improve the quality of supervision and control of work, Taylor Suggested the technique of
functional foremanship. Under this scheme task of supervision is divided into several specialized
functions and each function is entrusted to a specialist foreman. Taylor believed that a single supervisor
cannot be competent to supervise all functional matters. Under functional foremanship – planning and
execution are separated. Each worker will have to take orders from these eight foremen.

Route Clerk
Lay down the sequence of operation.
Instruction Clerk
Prepare detailed instruction regarding different aspects of work such as machines and tools used,
techniques etc.
Time and Cost Clerk
Sends all information relating to the pay of the workers and to secure proper return of work from
them.
Disciplinarian
Deal with cases of breach of discipline and absenteeism .
Gang Boss
Assembles and setup tools and machines and teach the workers to make all their work motions in the
best way.
Repair Boss
ensures that each worker keeps his in good order.
Speed Boss
Ensures that machines and run at their best speed and job completion on time.
Inspector
Ensure the work of right quality of right standard.
2. Standardisation and simplification of work
Standardization refers to the setting standards for every business activity. It can be
standardization of raw material, machinery, method, process, product etc. These standards are the
benchmarks which must be adhered to during production.
Simplification aims at eliminating unnecessary diversity of products. It results in saving of cost
of labour, machines and tools.
3. Method Study
The main objective of method study is to find out one best way of doing the job. Its aim is to minimize
the cost of production, maximize the quality and satisfaction of the consumer.
4. Motion Study
Motion study refers to the study of movements (men, materials, machines) while doing a typical job. Its
aim is to eliminate unnecessary movements.
5. Time Study
It determines standard time taken to perform a well defined job. The Objective of time study is to
determine the number of workers to be employed, frame suitable incentives schemes and determine
labour cost.
6. Fatigue Study
Fatigue study seeks to determine the amount and frequency of rest internal in completing a task. This
will result in increased productivity.
7. Differential Piece Wage System
Differential piece rate system is a method of wage payment in which efficient and inefficient
workers are paid at different rates. This system rewards an efficient worker by paying him a higher
wage rate and penalises the slower worker by paying him a lower wage rate.
 Nature of Management Principles
1.Universal Applicability
The principles of management are applicable to all types of organizations (business, non-business,
large, small etc.) at all levels and at all times.
2. General Guidelines
Principles of Management are general guidelines to managerial action. They do not provide
readymade solution to all managerial problems.
3. Formed by Practice and Experimentation
The principles of management are formed by experience and experimentation. They are derived on the
basis of observation and analysis of events and by conducting experimental studies.
4. Flexible
The principles of management are not rigid prescriptions. They are flexible and can be modified as per
the demands of the particular situation.
5. Mainly Behavioral
Management principles are mainly behavioral in nature, because they aim at influencing behavior of
human beings.
6. Cause and Effect Relationship
The principle of management establishes relationship between cause and effect. They tell us what
will be the result of certain actions, decisions.
7. Contingent
Management principles are not static or absolute in nature. Their application is contingent or
dependent upon the prevailing situation at a particular point of
time.

SIGNIFICANCE / IMPORTANCE OF MANGEMENT PRINCIPLES

1. Provide useful insights into reality
The principles of management help managers in understanding real world situations. It increases their
knowledge and ability. It enables managers to learn from past mistakes and solve recurring problems
quickly. Thus managerial principles increase managerial efficiency.
2. Optimum utilization of resources and effective administration
Management principles aim at optimum utilization of human and physical resources for the
attainment of organization goals. By optimum we mean, maximum benefit with minimum cost.
3. Scientific Decision
Management principles enable managers to approach various problems systematically and
scientifically and help them in taking scientific decisions.
 4. Meeting Changing Environment Requirement
Principles of management help managers to meet the requirements of the changing environment.
Eg: equity – Social Environment
5. Fulfilling Social Responsibility
Management principles are helpful in meeting social obligations.
Eg: Fair remuneration
Equity
6. Management principles are used as a basis for management training, education and research.
These principles form a part of the graduate and postgraduate courses in management.

Henry Fayol and F W Taylor – A comparison

Basis Henry Fayol F W Taylor

1 Level Top level Management Shop floor level of a factory
2 Unity of Unity of command is strictly followed Unity of command is not followed. He
command insisted on functional foremanship
3 Applicability Universally applicable Applicable to specialized situation
4 Focus Improving overall administration Increasing productivity
5 Basis of Based on personal experience Based on observations and experimentations
formation