HENRY FAYOL ; ADMINISTRATIVE MANAGEMENT THEORY ( ALL YOU NEED TO KNOW) CA Anushri Agrawal anushriagrawal.com
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1 HENRY FAYOL ; ADMINISTRATIVE MANAGEMENT THEORY ( ALL YOU NEED TO KNOW) CA Anushri Agrawal anulohia.agrawal@gmail.com
2 WHO? A French An engineer in mining firm in 1860 at an age of 19 Develop a universal theory of management ( applicable in all types of organization) To make an organization efficient and effective irrespective of nature of the organization whether manufacturing or non manufacturing, big or small, commercial or charitable, govt or non govt. Fayol presented his total work in Administration Industrelle et general in
3 WHAT IS ADMINISTRATIVE MANAGEMENT THEORY? organization 6 activities Technical Commercial Managerial Financial Security Accounting 5 Functions Planning Organizing Commanding coordinating Controlling Principles ( 14) 3
4 ACTIVITIES Fayol argued that every organization performs 6 activities: 1) Technical : related to production, manufacturing, providing services (organic activity)( core activity) 2) Commercial : Buying or selling or exchange of goods and services 3) Financial : Procurement and utilization of finance ( optimum use of capital) 4) Security: Protection of Personnel and Property ( org security) 5) Accounting : Keeping of books( stock taking, accounts, costs and statistics) 6) Managerial : Most important activity, on which depends the success of the rest of the five activities. 4
5 FUNCTIONS Managerial activity consists of 5 Functions; 1. Planning 2. Organizing 3. Commanding 4. Coordinating 5. Controlling 5
6 PRINCIPLES: In all the 6 activities, the managerial activity is the most important which consist of 5 functions, and the efficiency of which depends on the 14 principles UNIVERSAL 6
7 1) Division of work work should be systematically divided so that there is no confusion.clarity about who has to do what 2) Authority and responsibility No responsibility without authority. Authority and responsibility are coexistent. 3) Initiative Employees should be encouraged to take initiative. Thinking and execution of plans at all managerial levels so that sub-ordinates has an opportunity to use own initiative 4) Centralization Centralization of authority at few places 5) Unity of Command Every employee should have only one boss. 6) Unity of Direction Every employee- one direction i.e. common goal 7
8 7) Stability of Tenure Retention of employess, minimum employee turnover 8) Discipline Every employee is expected to obey the rules of Organization. 9) Remuneration / Pay Fair wages 10) Subordination of individual interest to general interest Individual must subordinate their personal interests for greater organizational goal.( against sub- unit goal internalization) 11) Order Systematic arrangement of man, money and material. Specific place for everything. 12) Equity Equal pay for equal work; employees treated fairly and impartially 8
9 13) 14) Espirit de corps Spirit of coperation Harmony and unity within the organization Scaler Chain the chain of superiors ranging from the ultimate authority to the lowest rank. Scalar chain is the formal line of authority which moves from highest to lowest rank in a straight line. This chain specifies the route through which the information is to be communicated to the desired location/person. 9
10 EMPHASIS IN FAYOL THEORY STRUCTURAL Belief in principle Generality Efficiency Capable of Adaptability A set of ready made guidelines A universal theory More elaborative theory 10
11 CRITICAL APPRECIATION Ignoring human side of enterprise: By thinkers like Elton Mayo: Too mechanical and too structural Scaler chain, Unity of commnad, Centralisation, Division of work. Some principles where Fayol considered Psychological needs of individual : Equity, Initiative, Espirit de corps 11
12 Prescriptive theory Unlike Taylor, only principles no techniques to implement the principles. Scientific management was confined to manufacturing concerns. universal principles so techniques cant be universal and hencemanagers to develo operational tools suiting the needs of their enterprise Development of general techniques is not possible as general principles can be applied anywhere and everywhere. Fayol presented skeleton not the flesh. Flesh is to be provided by organization as per its unique needs. 12
13 Peter F Drucker said it cant be applied to modern organizations: hence irrelevant principles. Organizations such as boundry less or system organization cant work on the basis of hierarchy. Hence, Time universality of principles not applicable. 13
14 CAPABLE OF ADAPTABILITY Fayol himself kept and adapted for scope of flexibility in use of principles. 14 functional truths are principles rather than rules UOD along with UOC Level jumping: purposive violation of hierarchy principle: gang plank Centralization vs initiative PETER DRUCKER, Fayol s functional organization is still best way of designing structures of small businesses particularly manufacturing one. 14
15 15
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