Managers-Net

Principles & Functions of Management

Henri Fayol, a French engineer and director of mines, was born in a suburb of Istanbul in 1841, where his father, an engineer, was appointed Superintendent of Works to build a bridge over the Golden Horn. They returned to France in 1847. Fayol studied at the mining school "Ecole Nationale Supérieure des Mines" in St Etienne. At nineteen years of age he started as an engineer at a mining company "Compagnie de Commentry-Fourchambeau-Decazeville" in Commentry. Although Fayol's career began as a mining engineer, he moved into research geology and in 1888 joined Comambault as Director. Fayol turned the struggling Comambault operation round with his entrepreneurial approach to management thinking. On joining the company in 1888, the mine company employed over 1000 people; he held that position over 30 years until 1918. By 1900 the company was one of the largest producers of iron and steel in France, and regarded as a vital national industry. He was little known outside France until the late 1940s when Constance Storrs published her translation of Fayol's 1916 work Administration Industrielle et Generale.

On retirement he published his work - a comprehensive theory of administration - where he described and classified administrative management roles and processes which led to his recognition by others in the emerging debate about management. He is rightly seen as a key and early influential contributor to a classical or administrative management school of thought (even though he himself, it is thought, would never have recognised such a "school" - Jarvis 2005).

His theorising about administration was built on personal observation and experience of what worked well in terms of organisation. His aspiration for an "administrative science" sought a consistent set of principles that all organisations must apply in order to run properly.

F. W. Taylor published The Principles of Scientific Management in the USA in 1911, and Fayol in 1916 examined the nature of management and administration on the basis of his French mining organisation experiences.

Fayol synthesised various tenets or principles of organisation and management and Taylor on work methods, measurement and simplification to secure efficiencies. Both referenced functional specialisation.

Both Fayol and Taylor were arguing that principles existed which all organisations - in order to operate and be administered efficiently - could implement. This type of assertion typifies a "one best way" approach to management thinking. Fayol's five functions are still relevant to discussion today about management roles and action. He has proposed that there are five primary functions of management :

planning, organizing, commanding, coordinating, and controlling.

The five functions are set out below here and later in the paper some Industrial Engineering training applications (Six Functions) from the 1960's adds further food for thought - (the author sees these Six Functions as a pre-requisite to the management thinking of the day):-

to forecast and plan - prevoyance

examine the future and draw up plans of action;

to organise

build up the structure, material and human, of the undertaking;

to command

maintain activity among the personnel;

to co-ordinate

bind together, unify and harmonise activity and effort;

to control

see that everything occurs in conformity with policy and practise.

Fayol also synthesised 14 principles for organisational design and effective administration. It is worthwhile reflecting on these and comparing the conclusions to contemporary utterances by Peters, Kanter and Handy to name but three management gurus - Jarvis 2005. Fayol's 14 principles are:

specialisation/division of labour

A principle of work allocation and specialisation in order to concentrate activities to enable specialisation of skills and understandings, more work focus and efficiency, where efficiency is the direct ratio between INPUT & OUTPUT - the author sees a further management development as a pre-cursor to this thinking whereby 'EFFECTIVENESS' should always prevail over 'EFFICIENCY' - simplistically EFFICIENCY can often mean JOB RIGHT but 'EFFECTIVENESS' should always mean 'RIGHT JOB';

authority with corresponding responsibility

If responsibilities are allocated then the post holder needs the requisite authority to carry these out including the right to require others in the area of responsibility to undertake duties. Authority stems from:

• that ascribed from the delegation process (the job holder is assigned to act as the agent of the high authority to whom they report - hierarchy)
• allocation and permission to use the necessary resources needed (budgets, assets, staff) to carry out the responsibilities.
• selection - the person has the expertise to carry out the responsibilities and the personal qualities to win the support and confidence of others.

The Responsibility R = Authority A

relationship is important to understand. R = A enables accountability in the delegation process. How would we cope with situations where R > A? Are there work situations where our R < A?

judgement demands high moral character, therefore, a good leader should possess and infuse, into those around him, courage to accept responsibility. The best safeguard against abuse of authority and weakness on the part of a higher manager is personal integrity and particularly high moral character of such a manager ..... this integrity, is conferred neither by election nor ownership. 1916

A manager should never be given authority without responsibility - and also should never be given responsibility without the associated authority to get the work done.

discipline

The generalisation about discipline is that discipline is essential for the smooth running of a business and without it - standards, consistency of action, adherence to rules and values - no enterprise could prosper. in an essence - obedience, application, energy, behaviour and outward marks of respect observed in accordance with standing agreements between firms and its employees. 1916

unity of command

The idea is that an employee should receive instructions from one superior only. This generalisation still holds - even where we are involved with team and matrix structures which involve reporting to more than one boss - or being accountable to several clients. The basic concern is that tensions and dilemmas arise where we report to two or more bosses. One boss may want X, the other Y and the subordinate is caught between the two schools.

unity of direction

The unity of command idea of having one head (chief executive, cabinet consensus) with agreed purposes and objectives and one plan for a group of activities) is self explanatory, and requires no further examination here.

subordination of individual interest to the general interest

Fayol's line was that one employee's interests or those of one group should not prevail over the organisation as a whole. This would spark a lively debate about who decides what the interests of the organisation as a whole are. Ethical dilemmas and matters of corporate risk and the behaviour of individual "chancers" are involved here. Fayol's work - assumes a shared set of values by people in the organisation - a unitarism where the reasons for organisational activities and decisions are in some way neutral and reasonable. In later times the author sees the 'political' implications of decisions for example in the Public Sector, should be the pre-requisite of the Chief Executive and none other, since too early a consideration will both stifle and potentially 'corrupt' later professional management judgements.

remuneration of staff

the price of services rendered. 1916

The general principle is that levels of compensation should be "fair" and as far as possible afford satisfaction both to the staff and the enterprise (in terms of its cost structures and desire for profitability/surplus).

centralisation

Centralisation for Fayol is essential to the organisation and a natural consequence of organising. This issue does not go away even where flatter, devolved organisations occur. Decentralisation is frequently centralised, Jarvis 2005. The modes of control over the actions and results of devolved organisations are still matters requiring considerable attention.

scalar chain/line of authority

The scalar chain of command of reporting relationships from top executive to any employee, whatever their status, needs to be sensible, clear and understood - this understanding needs to be 'tested'.

order

The level of generalisation becomes difficult with this principle. Basically an organisation "should" provide an orderly place for each individual member - who needs to see how their role fits into the organisation and be confident, able to predict the organisations behaviour towards them. Thus policies, rules, instructions and actions should be understandable and understood. Orderliness implies steady evolutionary movement rather than wild, anxiety provoking, unpredictable movement - in a modern concept Job Evaluation, Job Specification and particularly Job Analysis should both inform and influence Fayol's terminology of 'order'.

equity

Equity, fairness and a sense of justice "should" pervade the organisation - in principle and practice.

stability of tenure

Time is needed for the employee to adapt to his/her work and perform it effectively. Stability of tenure promotes loyalty to the organisation, its purposes and values.

initiative

At all levels of the organisational structure, zeal, enthusiasm and energy are enabled by people having the scope for personal initiative. (Note: Tom Peters recommendations in respect of employee empowerment - Jarvis 2005)

esprit de corps

Here Fayol emphasises the need for building and maintaining harmony among the work force, team work and sound interpersonal relationships.

Certain principles stand out and are shared throughout the classical approach espoused by Fayol:

Scalar/ hierarchical principle

The chain of authority should be unbroken downwards leading from more authority to less. Managers carry out authority, more higher and more overall, less lower down and more detailed in day to day terms. Operations are lower, strategy is higher. This needs an upwards information chain, however, whereas people in roles and organisations with rules can become important in themselves: the old saying is that the Pope is the last person to know.

Unity of command

This is looking upwards. A subordinate receives orders from only one person just above (no matter how many subordinates that person covers). This is so classical it is unrealistic, given the variety of operations in an organisation. Systemic theorists instead consider how different operations can communicated to people taking their findings.

Span of control

This is about actual numbers of subordinates looking downwards. The direct control a manager has is fewer in terms of people higher up the scale, and more people by managers lower down. The kinds of decisions higher up are more varied and wide ranging, whereas the decisions taken lower down are predictable and repetitive and cover more people. Each subordinate (that is, a manager or worker below) is managed in an overall fashion by the super ordinate. The problem is whether specialisation into levels of expertise allows a manager above to have an overview based on equivalent information; the second problem is whether strategic oversight can be step by step hierarchical. Overviews may be unevenly placed in organisations depending on shat people do, know and understand.

Division of labour and specialisation

The narrower the task, the more expert a person can become, and therefore the more efficient. It is Adam Smith economics. What the classical approach does is fit this into organisations. The problem is alienation or anomie, as one just ends up being a human robot.

Correspondence of authority and responsibility

The more responsibility one has, the more in authority one is. As one goes down the organisation, authority reduces and so does responsibility. In more contemporary times, psychologists have argued for more responsibility as it gives a greater sense of ownership and care over the task. It means more authority too, so even the lowest worker should be listened to. The contradiction in the classical theory is that the lowest worker is also a specialist, and more so than the supervisor, and therefore carries some authority from the skill achieved.

(See Lucey, 1991, 70-71)

In the same way that Alfred P Sloan, the executive head of General Motors reorganised the company into semi-autonomous divisions in the 1920s, corporations undergoing reorganisation, to the current day, still apply "classical organisation" principles - very much in line with Fayol's observations.

Fayol's work has stood the test of time and has been shown to be relevant and appropriate to contemporary management. Many of today's management texts including Daft (2005) have reduced the five functions to four: (1) planning, (2) organising, (3) leading, and (4) controlling. Daft's text is organised around Fayol's four functions

Henri Fayol

STUDENTS MIGHT LIKE TO CONSIDER THIS FURTHER EXAMINATION OF FAYOL'S INFLUENCE FROM THIS ANECDOTAL EVIDENCE OF THE AUTHOR'S TRAINING IN HNC BUSINESS STUDIES IN THE 1960's:

Classification of Management Functions

Management (Organisation & Administration) plays arguably 'the most important part' in the government of undertakings: all undertakings, large or small, industrial, commercial, political or religious - this 'truism' might seem like 'common sense' - Fayol in order to expand this view of 'common sense' defined management (the attributes of managers) into SIX functions:

1. TECHNICAL - production, manufacture, adaptation;
2. COMMERCIAL - buying & selling - exchange (banking, insurance, warehousing, advertising);
3. FINANCIAL - search for an optimum use of capital;
4. SECURITY - of property & personnel;
5. ACCOUNTING - stocktaking, balance sheets, costs, statistics;
6. MANAGERIAL - planning, organisation, command, co-ordination & control.

These six groups of activities or essential functions were always present in a managerial post. Fayol argued that ALL managers required capability in all six functions - the job (managerial position) determined the level of each function where 100% covered the total job - varying percentages should be assigned to each function Fayol insisted.

Employees have different qualities; physical, mental, moral, general & specialist knowledge, experience. The possession of these qualities differ in degree between one employee and another - the implication is that one employee may be more suited to a post which 'emphasises' the need for one or other of the six functions -

Experience is a recollection of lessons - FAYOL

With a sole proprietor the span of abilities is likely to be narrow as all functions are required to be executed by one person, whereas in a large undertaking the span of abilities is likely to be wide, but each 'shop floor' employee is mainly concerned with one function only e.g. technical in the case of an electrical engineer of accounting in the case of an auditor.

Relative importance of requisite abilities of personnel in industrial concerns:

Table 1 gives Fayol's assessment of the relative importance of abilities needed by people engaged in industry e.g. National Coal Board used as an illustration since Fayol's background was mining. Fayol went on to verify his assessment, which at the time were of a general nature, and reached the following conclusion:-

In businesses of all kinds the essential ability of the lower ranks is the technical ability characteristic of the business, and the essential ability of the higher ranks is managerial ability.

Scrutiny of abilities in the case of other functions (i.e. managerial, commercial, financial, security and accounting) of a large industrial undertaking gives identical conclusions; the term 'technical ability' merely requires to be replaced by that of the ability appropriate to the particular function. Whatever function is in question, the most important ability required of the lower ranks is characteristic of the function viz. technical on the industrial side, commercial on the commercial side, financial on the financial side etc.. - the outstanding ability demanded of the higher ranks is without question the managerial ability.

Relative importance of requisite abilities of personnel (in charge - i.e. management) in industrial concerns - by type of organisation:

All these tables have as their object, the drawing of general attention to the importance of the managerial function in industrial concerns. The technical function has long been accorded the due rank that it must retain, but it is not sufficient of itself to ensure the smooth conduct of business affairs; assistance is needed from the other essential functions and in particular the managerial function - this leads us neatly to 'managerial control'

Managerial Control

- What did Fayol mean by this?

Here we can start with the following statement:

To manage is to forecast and plan, to organise, to command, to co-ordinate and to control.

'Control', as used by Fayol, is a managerial term for the 'assessment and review' of performance in conjunction with a particular work plan; this concept of control is a part of Fayol's definition of Management which, in turn, is an integral part of the six functions displayed by Management in industry.

These are set out in the paragraphs above.

Control in this sense means, setting a target (and understanding the capability to achieve it), assessing at regular intervals the advances made towards attaining that target and then analysing the reasons for any 'difference' between 'intention' and 'achievement'. From this analysis the management exerts control to encourage trends that lead more closely to achieving the target and to discourage trends that lead away from the achievement of the target.

Quality Control:

The term quality control has been used widely and loosely. In some cases it represents conventional acceptance screening inspection perhaps including records whereby defects can be assessed sooner rather than later. In other cases the term applies to complaint investigations and explanations - without action both control and quality fall away and both methods and quality organisation deteriorate to become sterile overhead expenses.

Furthermore improved quality and increased output can be directly opposed to one another. For this reason before applying any incentive considerations a suitable quality control system needs to be developed so that control can be exerted before quality is compromised in any way.

Quality Control then is the term used for the control of quality of a product and its components at all stages from the raw material to completion.

Credit Control:

The ratio between what the customer can afford to purchase and what the company can afford to let the customer purchase. Hence, it acts as a mean limit to a credit account. Naturally with credit charges of a higher percentage, both the organisation and the customer alike are bound to become wary of the potential of a high inflationary tract. In summary, the term credit Control is both control and manipulation of the amount of goods a customer can take on over a defined period of time.

Financial Control:

An aid to financial accounting concerned with overall results - an accounting form (ledger), setting out detailed operating costs of each section of an organisation, would be an indicator of financial control over the organisations operating (variable) costs.

Even where perpetual inventories are in use as part of a financial accounting system, the resulting information still falls short of meeting the production manager's requirements. This is because financial accounting (as a part of financial control) is concerned with recording relationships to outsiders. It shows the results of values added through manufacture, but cost accountancy (equally a part of financial control) traces the added value through each stage of production. The accounts are so organised so as to show the internal flow of the product, step by step, from the raw material stage to its final emergence as a finished product.

Cost Control:

Jackson defines cost control as the 'guidance and regulation of internal operations of a business, by means of modern methods of costing through the measuring of manufacturing and sales performance'.

The definition emphasises the fact that control is a matter of executive action: for such control to be effective, the executive acts as on information obtained by a process of analysis. Hence, analysis and control represent a cause and effect relationship.

Stores Control:

Usually used in conjunction with the purchase records system. Simply and ideally a format showing date, type and name of article, requisition number, invoice number, quantity required and name of supplier. In addition, the record acts as a reference when an item needs re-ordering. The information contained in the record furnishes the purchasing department with all the necessary data, eliminates reproduction of requisitions and avoids transcription errors. Thus the stores ledger clerk or other person charged with the responsibility for keeping stock in balance needs only to look over the cards, forms or system to see the percentages over or under the norm for each item.