Although his work wasn't widely known in the
United States until 1949, Henri Fayol is considered to be one of the fathers of modern management. Often referred to as the administrative theory,
Fayol believed that the success of an enterprise was more dependent on the administrative ability
of its leaders than on their technical ability. He came to this conclusion after reflecting
on his own experiences as the managing director of a French steelmaker known as Comambault. You see Fayol was hired on as managing director,
which was basically the equivalent of CEO, to oversee the liquidation of Comambault. Instead, Fayol put together a detailed plan
on how to bring Comambault back to financial solvency. Within twelve years, Comambault had risen
from its almost certain demise, and became one of the most valuable firms in all of France. While reflecting on his experiences, Fayol
realized this success wasn't due to his engineering background, but rather his ability to manage
people and get work done through others. In addition to founding the functions of management,
which we now know as planning, organizing, leading, and controlling, Fayol developed
the 14 principles of management. These principles were what Fayol believed
would help organizations engage in effective management. And many of these principles have become common
practices in organizations today. The first principle of management is the division
of work, commonly referred to as the division of labor. Fayol believed that by separating work into
smaller tasks it would allow workers to develop an expertise in a certain area. Since workers would perform only a series
of specific tasks instead of a larger collection, it is rather safe to say that over time workers
would become more proficient in these tasks. In addition, some workers are not suited for
certain tasks. So by divided the work into a smaller set
of tasks workers can be placed in areas where they can ultimately excel. The second principle is one of authority and
responsibility. Fayol claimed that a managers authority should
be consistent with his level of responsibility. While authority is viewed as the right to
give orders, responsibility is seen as being accountable. Thus someone with authority in an organization,
at least according to Fayol, should also be held accountable for the orders that are given. The third principle is discipline. Discipline is often described as the practice
of training people to obey rules. In the case of Fayol's administrative theory,
discipline involves creating clear rules and procedures for employees at all levels of
the organization to follow. These rules were meant to establish order
as well as insure good behavior in the workplace. And in order to establish an incentive for
employees to follow these rules, Fayol advocated that penalties should be used. The fourth principle of management is unity
of command. Fayol believed that unity of command represented
the single most fundamental principle in all of these principles of management. From this principle, Fayol claimed that all
of the other principles originated. Fayol strongly believed that no one can serve
two masters at the same time. What this often does is cause confusion amongst
the workers and conflict among supervisors as they struggle over who's direction should
be followed. So Fayol argued that each worker should report
to and receive orders from just one supervisor. This would reduce misunderstandings and ultimately
lead to an environment in which all employees knew exactly what was expected of them. The fifth principle of management is unity
of direction. Instead of individuals and teams pursuing
their own goals that may be in conflict with one another, Fayol claimed that the entire
organization should be pursuing a common goal or objective. Getting everyone in the organization working
towards the same goal is absolutely critical to an organization's success. Somewhat in line with this principle is the
sixth principle of management, which is the subordination of individual interests to general
interests. Successful organizations require all individuals
to put aside their own self-interests and pursue only what is in the best interest of
the group. So any one interest of an individual should
certainly not take priority over the interests of the organization as a whole. The seventh principle of management is renumeration. Renumeration represents fairness in the pay
practices of an organization. Fayol believed that variables such as labor
supply, cost of living, business profitability, and general business conditions should all
be considered when establishing a worker's rate of pay. If organization's do not maintain fair and
equitable pay practices it will make it more difficult to encourage workers to abandon
their own interests for the sake of those of the team. The eighth principle of management is one
of centralization. Centralization represents the degree to which
decision-making authority is concentrated in the hands of a few people, or spread throughout
the organization to employees at different levels. A centralized organization by its very nature
establishes that only a few key individuals have the authority to make decisions. Opposite to a centralized organization is
one that is decentralized, which means that decision-making authority is given to employees
at lower levels of the organization within certain boundaries. Although Fayol agreed that a centralized form
of distributing authority allowed for more accurate decisions to be made since those
who may lack experience are prevented from making decisions, he also believed that employees
should given some freedom so that they can show what he called initiative. Since all organizations vary in terms of size
and scope, Fayol claimed that the degree of centralization or decentralization used is
largely dependent on the organization itself. However Fayol did claim that organizations
should only use a level of centralization that was absolutely necessary, and instead
focus on allowing individual workers with the freedom necessary to show individual initiative. The ninth principle of management is the scalar
chain. The scalar chain represents the organization's
hierarchy, which is commonly illustrated through an organization chart. The presence of a scalar chain allows employees
to be familiar with where they stand in the organizational hierarchy, as well as who they
report to and who they should approach if they have questions. The tenth principle of management is order. For the sake of efficiency and coordination,
Fayol claimed that there should be a place for everything and everything should be in
it's place. The creation of a clean and orderly work environment
is important to productivity, but also has implications for safety on the job. The eleventh principle of management is Equity. Fayol believed that an important element to
successful management in an organization was the equitable treatment of workers by management. If management intends to achieve long-lasting
commitment from workers, it's important that workers are treated fairly. Otherwise, workers may not pursue the goals
of the organization or expend the appropriate amount of effort to achieve those goals. The twelfth principle of the management is
stability of tenure of personnel. This principle refers to management's task
of minimizing employee turnover. Turnover, whether voluntary or not, can be
very costly to an organization. In addition to recruiting, selection, and
training costs, organization's also have to deal with disruptions in output that can be
caused by employee turnover. So in order to minimize these issues, Fayol
claimed that management should make every attempt to retain productive workers. The thirteenth principle of management is
initiative, which represents investing in the development of an organization's workers. Fayol believed that management should encourage
worker initiative, meaning the undertaking of new responsibilities. This allows workers to acquire new skills,
while also freeing up management to perform other tasks. The fourteenth and final principle of management
as established by Henri Fayol is what is often referred to as the spirit of cooperation. This principle refers to managements responsibility
to improve morale and promote a sense of unity. In order to accomplish this, Fayol emphasized
the importance of teamwork as well as communication in an organization. Together these fourteen principles constituted
effective management practices. And although it has been over one hundred
years since Fayol wrote of these principles in his book entitled General and Industrial
Management, these principles are still widely agreed upon and followed today. But perhaps an even greater contribution to
modern day management was Fayol's insistence that the success of an organization was determined
more so by the administrative ability of its leaders as opposed to their technical ability. As a result, focus began to shift towards
training and educating managers for the administrative demands of today's organizations. Well that's all for this video. In our next video, we'll discuss the work
of German sociologist Max Weber. For questions please leave them in the comment
box below and I'll do my best to get back to those in a timely fashion. And remember to subscribe to Alanis Business
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