VIDYA BHAWAN BALIKA VIDYA PITH

शक्ति उत्थान आश्रम लखीसराय बिहार

class 12 commerce Sub. BST. Date 23.4.2020

Teacher name – Ajay Kumar Sharma Fayol’s 14 Principles of Management

Henry Fayol who is regarded in responsible quarters as the real father of management

science, has evolved fourteen principles of management

The fourteen principles of management as given by Henry Fayol are:-

1. Division of Work 2. Authority and Responsibility 3. Discipline 4. Unity of Command

5. Unity of Direction 6. Subordination of Individual Interest to General Interests

7.Remuneration 8. Centralisation 9. ScalarChain 10. Order 11. Equality 12. Stability of

Tenure of Personnel 13. Initiative 14. Esprit De Corps.

Fayol’s 14 Principles of Management

The management has to perform a number of functions such as planning, organising, co-

ordinating, directing, controlling etc. for the purpose of achieving its aims of operational

efficiency, financial economy, and profitable return on investment. In order to perform

the management functions effectively so as to enable the business concern to achieve its

aims, there is need for the business concerns to observe certain principles of

management.

Henry Fayol who is regarded in responsible quarters as the real father of

management science, has evolved fourteen principles of management,

which may be briefly stated as follows:

Principle # 1. Division of Work:

The object of division of work is to derive benefits from the principle of specialisation.

The various functions of management like planning, organisation, co-ordination control,

etc., cannot be performed efficiently by a single proprietor or by a group of directors on

their own and they have to be entrusted to specialists in the related fields. Division of

work in the management process produces more and better work with the same effort.

Principle # 2. Authority and Responsibility:

As management consists in getting the work done through others, it implies that the

manager should have the right to give orders and the power to extract obedience. Thus,

the manager gives orders to his subordinates to perform the job as per his direction. A

manager may exercise his official authority and also his personal authority.

Official authority is derived from his official status, while personal authority is

compounded by intelligence, experience, moral worth, ability to lead, past service etc.

Authority is closely related to responsibility, and it arises wherever authority is exercised.

An individual to whom authority is given to exercise power must also be prepared to bear

the responsibility to perform the work.

Principle # 3. Discipline:

Discipline is absolutely essential for the smooth running of business. By discipline, we

mean obedience to authority, observance of rules of service and norms of performance,

respect for agreements, sincere efforts for completing the given job, respect for superiors,

etc. The best means of maintaining discipline are – (a) good supervisors at all levels, (b)

clear and fair agreements between the employer and the employee, and (c) judicious

application of penalties.

Principle # 4. Unity of Command:

This principle requires that the employee should receive orders from one superior only

for any action or activity. It means workers in a department are required to be

accountable to one superior for complying with the orders for performing a job. If two

superiors wield authority over the same person or department, it causes uneasiness,

disorder, indiscipline among employees and undermining of authority. Further, for the

same job, if the workers have to report to more than one superior, they will be confused

and it will be difficult to pinpoint responsibility on anyone.

Principle # 5. Unity of Direction:

It means that there should be one head and one plan for a group for activities having the

same objective. While unity of command is concerned with the functioning of personnel,

unity of direction is concerned with the functioning of the body corporate, the

departments and sub- departments comprising the business concern. For every category

of work, there should be one plan of action and it should be executed under the overall

control and supervision of one head or superior.

Principle # 6. Subordination of Individual Interest to General Interests:

In a business concern, the interest of one employee or group of employees should not

prevail over the common interest or should not block the fulfilment of general goals of

the business concern. If there is disagreement among two superiors on any matter, the

management should reconcile the differences so as to conduct the overall operation of

the enterprise smoothly.

Principle # 7. Remuneration:

The remuneration that is paid to the personnel of the firm should be fair and as far as

possible, afford satisfaction both to the personnel and the firm. Employees who are paid

decent wages or salary will have a high morale and their efficiency will be high. Further,

contented staff is an asset to the firm and also there will be good relationship between

the management and the employees. The rate of remuneration paid should be based on

general business conditions, cost of living, productivity of the concerned employees and

the capacity of the firm to pay.

Principle # 8. Centralisation:

If subordinates are given a higher role and importance in the management and

organisation of the firm, it is decentralisation whereas if they are given less role and

importance, it is centralisation. Management has to decide the degree of centralisation

and decentralisation’s decisive authority on the basis of the nature of circumstances, size

of undertaking, the type of activities and the nature of organisational structure. The

objective should be the optimum utilisation of faculties of the personnel.

Principle # 9. Scalar Chain:

Scalar principle exhibits the chain of superiors or the line of authority from the highest

executive to the lowest one for the purpose of communication. It states superior-

subordinate relationship and the responsibility of superiors in relation to subordinates

at the various levels. According to this principle, order or communications should pass

through the proper channels of authority along the scalar chain.

But in case there is need for swift action, the principle of scalar chain (proper channel of

authority) may be reconciled with due respect for the line authority by making direct

contact with the concerned authority instead of going through the proper channel.

A diagrammatical explanation of Scalar Chain is given. This diagram consists of double

ladders and we find a hierarchy of authority from A to E and A to P. If section D wants

to communicate with section O, the file should go up the ladder from D to A and then

descend to O, stopping at each section. This involves a lengthy procedure and is time-

consuming.

In case there is need for swift action or urgent contact, D and O may be authorised by

their respective superiors (viz., C and N) to have direct contact to settle that matter. By

this method, the scalar principle is safeguarded and at the same time, the subordinate

officers are enabled to take swift action.

Principle # 10. Order:

Management should obtain order in work through suitable organisation of men and

materials. The principle of “right place for everything and for everyman” should be

observed by the management. To observe this principle, there is need for scientific

selection of competent personnel, correct assignment of duties to the personnel and good

organisation.

Principle # 11. Equality:

Equality means fair dealings, equality of treatment and accommodative or co-operative

attitude among the personnel in the undertaking. Equality results from a combination of

kindness and justice. Employees expect equity from the management. The application of

equity requires good sense, experience and good nature on the part of the manager. The

managerial treatment of the subordinates should be free from the influence of prejudices

and personal likes or dislikes. Equity ensures healthy industrial relations between

management and labour which is essential for the successful working of the enterprise.

Principle # 12. Stability of Tenure of Personnel:

In order to motivate the workers to show keener interest in their work, enterprise,

initiative and turn out of better work, it is necessary that they should be assured security

of job by the management. If they have fear of insecurity of job, their morale will be low

and they cannot turn out better work. Further, they will not have a sense of attachment

of the firm and they will always be on the lookout for a job elsewhere. Hence, the

management must ensure stability of tenure of personnel.

Principle # 13. Initiative:

Initiative means freedom to think and execute a plan. The zeal and energy of employees

are augmented by initiative. Innovation which is mark of technological progress is

possible only where the employees are encouraged to take initiative. According to Fayol,

“initiative is one of the keenest satisfactions for an intelligent man to experience” and

hence, he advises managers to give its employees sufficient scope to show their initiative.

Employees should be welcomed to make any suggestions regarding the formulation of

objectives and plans and they should be encouraged to turn out better work with

maximum versatility.

Principle # 14. Esprit De Corps:

Since ‘union is strength’, the management should clear a team spirit among the

employees. Only when all their personnel pull together as a team, there is scope for

realising the objectives of the concern. Harmony and unity of the staff of a concern is a

great source of strength to the undertaking. The management should not follow the

policy of ‘divide and rule’ and it should strive to maintain unity among the staff. If there

are any differences or misunderstandings or symptoms of distrust, the management

should take necessary steps.

Fayol’s Fourteen Principles of Managemen – Quick Notes

1. Division of Work – This leads to specialisation of work and organisational success.

2. Authority and responsibility coexist- Everyone should have specific responsibility and

matching authority.

3. Unity of command- One person should report to only one boss.

4. Unity of direction- All functions of an organisation should have the same direction.

5. Equity- Rewards should be in relative proportion to the contribution.

6. Order- Do things systematically and scientifically.

7. Discipline- Adhere to lines of authority, norms, rules, and regulations.

8. Initiative- Undertake actions that achieve goals better, even when a specific direction

is absent.

9. Fairness- Be consistent with rules and logic, and implement actions without

impartiality and favouritism.

10. Stability- Have constancy of purpose, methods, rules, and procedures.

11. Scalar chain- Flow of authority and information is from top to bottom and vice versa,

in a step-by-step manner.

12. Subordination of individual interest to general interest- Individuals draw their

identity and livelihood from the organisation, and hence should give priority to

organisational interest.

13. Esprit de corps- It refers to creating team spirit and harmony in the work group as a

whole.

14. Centralisation and decentralisation- The need to accept the importance of both, and

creating a balance between both.

Criticism of Henry Fayol’s Principles of Management:

Unity of command is redundant in an era of matrix organisations. Organisations such as

Goldman Sachs have tried joint management concept where two people concurrently

head one responsibility successfully. Unity of direction, as envisaged originally, is

impossible today, since businesses enter many different areas.

For example, Bharti Airtel’s main business is mobile telephony, but they are also into

other businesses. Stability seldom exists in organisations as they begin to thrive through

continuous and disruptive changes. In a networked world, scalar chain principle does

not stand scrutiny. The principle of subordination of individual interest to general inter-

est is often criticised as it is used to exploit employees and members of an organisation

from time to time.

Remuneration refers to financial compensation. According to this principle, financial

compensation for work done should be fair to the employees and to the organisation.

Remuneration should be decided on the basis of cost of living, workers qualifications and

skills, success of the business, general business/ market conditions.

For example– an HR manager may have a salary of about 11 lakh (or more) per month

in a MNC in Mumbai, depending upon the manager’s experience, qualifications, city’s

cost of living, etc.

8. Centralisation:

Centralisation is related to power and authority, which should be concentrated at upper

levels of the organisation with superiors maintaining final responsibility. However,

superiors should give their subordinates enough authority to perform their jobs

properly. For example- in an organisation top management needs 100 steering wheels

for production of 100 cars and powers to change the production from 100 to 200 steering

wheels lies with the top management and not with the supervisors or managers.

9. Scalar Chain:

Scalar chain principle implies that a single, uninterrupted chain of authority should

extend from the top level to the lowest position in the organisation. This further implies

that the line of authority and communication flows from owners or board of directors to

the superiors or foreman to the subordinates and workers. As an exception, Fayol

introduced the concept of ‘Gang Plank’ to avoid delay in communication in case of

emergency between two people working on the same level but in different departments.

Gang plank is a temporary arrangement between two subordinates in different

departments to facilitate quick and easy communication.

As shown in Fig. 2.2, there are two scalar lines from ‘A’ to ‘G’ and ‘A’ to ‘Q’, where ‘A’ is

the head of the organisation, while ‘G’ and ‘Q’ are the workers at the lowest level in an

organisation. The two scalar lines depict two different departments headed by ‘A’. ‘B’ and

‘L’ are a level lower than ‘A’ and so on. An emergent communication can be made

between ‘F’ and ‘P’ through a gang plank shown as a dotted line where F and P can contact

each other directly. However, both ‘F’ and ‘P’ need to contact their respective superiors

‘E’ and ‘O’ regarding their communication with each other.

10. Order:

Order means that the right person is at the right place. This principle states that

materials, equipment and other inputs should be in the right place at the right time and

workers should be assigned to the jobs best suited to them.

For example, to produce 100 steering wheels, the foreman should ensure that suitable

inputs are in order to produce the exact number of steering wheels to avoid wastage or

confusion about the order.

11. Equity:

Equity principle implies that all workers should be treated equally and provided equal

opportunity. Equity however does not discount for sternness and forcefulness. Superiors

in the organisation should be kind and impartial and should not discriminate in terms

of gender, religion, caste, etc.

For example, women and men employees should be equally treated with respect and

professionalism.

12. Stability of Tenure of Personnel:

Stability of tenure refers to retention of workers by removing the feeling of job insecurity

among workers. Retaining workers should be the highest priority of management that

provides security, increase productivity and reduces employee turnover. High rates of

employee turnover1 are inefficient and should be avoided. For example- if a hard-

working employee is dissatisfied with her monotonous job, she can be retained by

providing a new position (or responsibility) in another department within the company

that requires her to explore and advance her capabilities.

13. Initiative:

This principle implies that workers or subordinates should be given the freedom to take

initiative in carrying out the work. They feel satisfied with their jobs and in turn increase

efficiency of the organisation.

For example– satisfied employees usually come on time and leave on time ensuring

quality of work and maintaining time efficiency without being instructed by the

management.

14. Esprit de Corps:

Esprit de corps literally means team spirit and harmony that unites the organisation thus

promoting a sense of organisational unity. Esprit de corps is a French phrase which

means ‘group spirit’ and every organisation should maintain group cohesion to facilitate

productivity and efficiency.

For example, a worker’s injury that may lead to delay and loss in time for job

completion can be managed by other workers uniting together and covering the possible

time and costs lost by the injured worker.

Fayol’s 14 Principles of Management – Division of Work, Authority and Responsibility,

Discipline, Unity of Command, Centralisation, Scalar Chain and a Few Others

Fayol introduced the following general principles of management:

1. Division of Work:

According to Fayol there should be clear cut division of work in the organization.

Division of labour is done to cover the all activities of the organization and to avoid the

overlapping of the activities. This ensures more and better work with the same effort in

the organization.

2. Parity of Authority and Responsibility:

Authority and responsibility both carry together in the organization. Due to the co-

existence there should be parity between these two. Authority is not to be conceived of

apart from responsibility. Once authority is exercised responsibility arises.

3. Discipline:

Discipline is inherent part of the organization. It means there should be respect for

agreements designed to secure obedience. Discipline prevails throughout the

organization to ensure its smooth and effective functioning. Clear and fair agreements,

good supervision and judicious application of penalties are maintained by discipline.

4. Unity of Command:

According to this principle a person should get orders and instructions from only one

superior. This should be in practice because dual authority over any employee became

the causes of confusion and indiscipline. This principle is contrary to Taylor’s functional

foremanship.

Fayol told on this conflicting view that “I do not think that a shop can be well run in

flagrant violation of this (unity of command). Nevertheless Taylor successfully managed

large-scale concerns. I imagine in practice, Taylor was also able to reconcile

functionalism with the principle of unity of command but this is the supposition whose

accuracy I am not in position to verify.”

Fayol considered unity of command as an important principle of an organization. He

says that “Should it (unity of command) be validated, authority is undermined; discipline

is in Jeopardy, order disturbed and stability threatened.” This rule seems fundamental

to me and so I have put it to the rank of a principle.

5. Unity of Direction:

There must be one head and one plan for each group of activities having the same

objectives. The unit of the organization must be directed for the objectives of the unit.

Unity of direction is related with functioning of the organization in respect of grouping

of its activities while unity of command is concerned with personnel at all levels in the

organization in terms of reporting relationship. Unity of direction ensures better

coordination among various activities of the organization.

6. Subordination of Individual Interest to General Interest:

General Interest is above to individual interest. In the case of any conflict between

individual and general interest the former must be subordinate. However, the

importance of general interest is reduced by factors like ambition, laziness, weakness etc.

Therefore, the relationship between employer and employee should be fair. A constant

vigilance and supervision is required for this purpose.

7. Remuneration of Personnel:

A fair and Reasonable remuneration should be paid to the employees and it must provide

maximum possible satisfaction to employees and employers. Fayol advocated profit

sharing only for managers. He did not favour profit sharing for workers. He also

advocated non-monetary benefits for the organizations.

8. Centralisation:

Any activity which goes to reduce the importance of subordinate’s role is centralization.

Fayal refers the extent to which authority is centralized or decentralized. Centralisation

is the natural order in small organizations while decentralization is regained for the large

firms. Absolute centralization is not feasible in any organization. Centralisation and

decentralization takes place according to the need and nature of the organization.

9. Scalar Chain:

The scalar chain of authority and of communication from top to bottom should be

present in the organisation. It consists that each upward or down word communication

must flow through each position in the line of authority. This role must be followed by

the organisations. This takes place in the special circumstances of the organization.

In special circumstances only the rule of scalar chain may be violated. Fayol suggested

the concept of ‘gang plank’ which is used to present the scalar chain from bogging down

action.

In this figure A is the top man having immediate subordinates B and J. In turn B and J

are having immediate subordinates C and K. This continues to the level of G and O

ordinarily the communication must flow from A to C and coming from top to down.

Similarly, it must flow from A to O and vice versa.

If A wants to communicate with G then it will be done via- B, C, D, E and F and upward.

Communication will flow via E, F, D, C, D. This is a very time taking affair. Therefore,

Fayol suggested the principle of gang plank. This system allows E to communicate with

M, without following scalar chain. This process will save the time and energy.

10. Order:

There should be an order related to the arrangement of things and people. There should

be a place for everything and everything should be in its places. On the same way, there

should be right person in the right place. This proper order ensures efficient order

demands precise knowledge of the human requirements and resource of the organization

and a constant balance is required. Generally it is more difficult to make balance in the

large size of organisations.

11. Equity:

It treats all peoples equal with justice and kindness. There should be no discrimination

on any ground in the organization. It provides loyalty in the organisation.

12. Stability of Tenure:

There should be stability in the tenure of the employees of the organisation. Only stable

employees will take initiative and they will show loyalty with the organisation. The

accountability of the employees can be also ensured by stability of tenure.

13. Initiative:

Initiative is a very important feature of the organisation. Managers encourages to their

employees for initiative within the limits of authority and discipline. Initiative provides

better solution and understanding about the organisation.

14. Esprit De Corps:

This last principal of management is known as – ‘Union is strength”. It also extends the

unity of command for team work to achieve the objectives of the organisation.

Fayol’s 14 Principles of Management in Details

A principle means a fundamental truth. It establishes cause and effect relationship

between two or more variables under the given situation. They serve as a guide to

thought and actions. Therefore, management principles are basically the statements of

fundamental truth based on logic which provide guidelines for managerial decision-

making and actions.

These principles are derived:

i. On the basis of observation and analysis, i.e., practical experience of managers.

ii. By conducting experimental studies.

Henry Fayol has given 14 principles of management as stated under:

1. Division of Labour:

Henry Fayol has stressed on the specialization of jobs. He recommended that work of all

kinds must be divided and subdivided and allotted to various persons according to their

expertise in a particular area. Subdivision of work makes it simpler and results in

efficiency. It also helps the individual in acquiring speed and accuracy in his

performance. Specialization leads to efficiency and economy in spheres of business.

2. Party of Authority and Responsibility:

Authority and responsibility coexist. If authority is given to a person, he should also be

made responsible. In the same way, if anyone is made responsible for any job, he should

also have the concerned authority.

Authority refers to the right of superiors to get exactness from their subordinates

whereas responsibility means obligation for the performance of the job assigned. There

should be a balance between the two, i.e., they must go hand in hand. Authority without

responsibility leads to irresponsible behaviour whereas responsibility without authority

makes the person ineffective.

3. Principle of One Boss:

A subordinate should receive orders and be accountable to one and only one boss at a

time. In other words, a subordinate should not receive instructions from more than one

person because –

i. It undermines authority.

ii. Weakens discipline.

iii. Divides loyalty.

iv. Creates confusion.

v. Delays and chaos.

vi. Escaping responsibilities.

vii. Duplication of work.

viii. Overlapping of efforts.

Therefore, dual subordination should be avoided unless and until it is absolutely

essential. Unity of command provides the enterprise a disciplined, stable and orderly

existence. It creates harmonious relationship between the superiors and subordinates.

4. Unity of Direction:

Fayol advocates “one head one plan” which means that there should be one plan for a

group of activities having similar objectives. Related activities should be grouped

together. There should be one plan of action for them and they should be under the

charge of a particular manager.

According to this principle, efforts of all the members of the organization should be

directed towards common goal. Without unity of direction, unity of action cannot be

achieved. In fact, unity of command is not possible without unity of direction.

Difference between Unity of Command and Unity of Direction:

Unity of Command:

i. Meaning – It implies that a subordinate should receive orders and instructions from

only one boss.

ii. Nature – It is related to the functioning of personnel.

iii. Necessity – It is necessary for fixing responsibility of each subordinate.

iv. Advantage – It avoids conflicts, confusion and chaos.

v. Result – It leads to better superior subordinate relationship.

Unity of Direction:

i. Meaning – It means one head, one plan for a group of activities having similar

objectives.

ii. Nature – It is related to the functioning of departments, or organization as a whole.

iii. Necessity – It is necessary for sound organization.

iv. Advantage – It avoids duplication of efforts and wastage of resources.

v. Result – It leads to smooth running of the enterprise.

Therefore, it is obvious that they are different from each other but they are dependent

on each other, i.e., unity of direction is a prerequisite for unity of command. But it does

not automatically comes from the unity of direction.

5. Equity:

Equity means combination of fairness, kindness and justice. The employees should be

treated with kindness and equity if devotion is expected of them. It implies that

managers should be fair and impartial while dealing with the subordinates. They should

give similar treatment to people of similar position. They should not discriminate with

respect to age, caste, sex, religion, relation, etc.

Equity is essential to create and maintain cordial relations among the managers and sub-

ordinate. But equity does not mean total absence of harshness. Fayol was of opinion that,

“at times force and harshness might become necessary for the sake of equity”.

6. Order:

This principle is concerned with proper and systematic arrangement of things and

people. Arrangement of things is called material order and placement of people is called

social order.

Material order – There should be safe, appropriate and specific place for every article

and every place to be effectively used for specific activity and commodity.

Social order – Selection and appointment of most suitable person on the job. There

should be a specific place for everyone and everyone should have a specific place so that

they can easily be contacted whenever the need arises.

7. Discipline:

According to Fayol, “Discipline means sincerity, obedience, respect of authority and

observance of rules and regulations of the enterprise”. This principle applies that

subordinates should respect their superiors and obey their order. It is an important

requisite for smooth running of the enterprise. Discipline is not only required on part of

subordinates but also on the part of management.

Discipline can be enforced if –

i. There are good superiors at all levels.

ii. There are clear and fair agreements with workers.

iii. Sanctions (punishments) are judiciously applied.

8. Initiative:

Workers should be encouraged to take initiative in the work assigned to them. It means

eagerness to initiate actions without being asked to do so. Fayol advised that

management should provide opportunity to its employees to suggest ideas, experiences

and new methods of work.

It helps in developing an atmosphere of trust and understanding. People then enjoy

working in the organization because it adds to their zeal and energy. To suggest

improvement in formulation and implementation of plans. They can be encouraged with

the help of monetary and non-monetary incentives.

9. Fair Remuneration:

The quantum and method of remuneration to be paid to the workers should be fair,

reasonable, satisfactory and rewarding of the efforts. As far as possible, it should accord

satisfaction to both the employer and the employees. Wages should be- determined on

the basis of cost of living, work assigned, financial position of the business, wage rate

prevailing, etc.

Logical and appropriate wage rates and methods of their payment reduce tension and

differences between workers and management creates harmonious relationship and

pleasing atmosphere of work. Fayol also recommended provision of other benefits such

as free education, medical and residential facilities to workers.

10. Stability of Tenure:

Fayol emphasized that employees should not be moved frequently from one job position

to another, i.e., the period of service in a job should be fixed. Therefore, employees

should be appointed after keeping in view principles of recruitment and selection but

once they are appointed, their services should be served.

According to Fayol, “Time is required for an employee to get used to a new work and

succeed to doing it well but if he is removed before that he will not be able to render

worthwhile services”.

As a result, the time, effort and money spent on training the worker will go waste.

Stability of job creates team spirit and a sense of belongingness among workers which

ultimately increase the quality as well as quantity of work.

11. Scalar Chain:

Fayol defines scalar chain as – “The chain of superiors ranging from the ultimate

authority to the lowest”. Every order, instruction, message, request, explanation, etc.,

has to pass through scalar chain. But, for the sake of convenience and urgency, this path

can be cut short and this short cut is known as Gang Plank.

A Gang Plank is a temporary arrangement between two different points to facilitate quick

and easy communication. Gang Plank clarifies that management principles are not rigid

rather they are flexible. They can be moulded and modified as per the requirements.

12. Subordination of Individual Interest to General Interest:

An organization is much bigger than the individuals, it has therefore, and interest of the

undertaking should prevail in all circumstances. As far as possible, reconciliation should

be achieved between individual and group interests. But in case of conflict, individuals

may be sacrificed for bigger interests.

In order to achieve this attitude, it is essential that –

i. Employees should be honest and sincere.

ii. Proper and regular supervision of work.

iii. Reconciliation of mutual differences and clashes by mutual agreement, for example,

for change of location of plant, for change of profit sharing ratio, etc.

13. Espirit De’ Corps (Can be Achieved through Unity of Command):

It refers to team spirit, i.e., harmony in the work groups and mutual understanding

among the members. Spirit De’ Corps inspires workers to work harder. Fayol cautioned

the managers against dividing the employees into competing groups because it might

damage the morale of the workers and interest of the undertaking in the long run.

To inculcate Espirit De’ Corps, the following steps should be undertaken:

i. There should be proper coordination at all levels.

ii. Subordinates should be encouraged to develop informal relations among themselves.

iii. Efforts should be made to create enthusiasm and keenness among the subordinates

so that they can work to the maximum ability.

iv. Efficient employees should be rewarded and those who are not up to the mark should

be given a chance to improve their performance.

v. Subordinates should be made conscious of whatever they are doing is of importance

to the business and society.

i.e., face-to-face communication should be developed. The managers should infuse team

spirit and belongingness. There should be no place for misunderstanding. People then

enjoy working in the organization and offer their best towards the organization.

14. Centralization and Decentralization:

Centralization means concentration of authority at the top level. In other words,

centralization is a situation in which top management retains most of the decision-

making authority. Decentralization means disposal of decision-making authority to all

the levels of the organization.

In other words, decentralization is sharing authority downwards. According to Fayol,

“Degree of centralization or decentralization depends on factors like size of business,

experience of superiors, dependability and ability of subordinates, etc.”

Anything which increases the role of subordinates is decentralization and anything

which decreases, it is centralization. Fayol suggested that absolute centralization or

decentralization is not feasible. An organization should strike to achieve a balance

between the two.