Chapter 2 — Principles of Management

Chapter 2, Principles of Management, covers the meaning, nature, and significance of management principles, followed by F.W. Taylor's Scientific Management — its four principles and seven techniques — and Henri Fayol's fourteen principles of management, concluding with a comparison of the contributions of Taylor and Fayol.

A managerial principle is a broad and general guideline for decision-making and behaviour. Management principles are not as rigid as principles of pure science; they deal with human behaviour and must be applied creatively given the demands of the situation.

The principles of management are: universally applicable (to all types of organisations), general guidelines (not readymade solutions), formed by practice and experimentation, flexible (not rigid prescriptions), mainly behavioural in nature, establishing cause-and-effect relationships, and contingent upon the prevailing situation at a particular point of time.

Taylor's four principles are: (i) Science, not Rule of Thumb — replacing guesswork with scientific study to find the one best method; (ii) Harmony, not Discord — complete mental revolution so management and workers realise their true interests are one; (iii) Cooperation, not Individualism — replacing competition with cooperation; and (iv) Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity through scientific selection and training.

Taylor's techniques are Functional Foremanship (eight specialists at shop floor), Standardisation and Simplification of Work, Method Study (finding the one best way from procurement to delivery), Motion Study (eliminating unnecessary movements), Time Study (determining standard time for a task), Fatigue Study (fixing rest intervals), and the Differential Piece Wage System (higher rate for efficient workers, lower rate for those below standard).

Functional Foremanship is Taylor's technique that separates planning from execution at the shop floor. Under the Factory Manager, a Planning Incharge oversees four specialists — instruction card clerk, route clerk, time and cost clerk, and disciplinarian — while a Production Incharge oversees speed boss, gang boss, repair boss, and inspector. Each worker receives orders from these eight specialists in their respective areas.

Fayol's fourteen principles are: Division of Work, Authority and Responsibility, Discipline, Unity of Command, Unity of Direction, Subordination of Individual Interest to General Interest, Remuneration of Employees, Centralisation and Decentralisation, Scalar Chain, Order, Equity, Stability of Personnel, Initiative, and Esprit De Corps.

Unity of Command means each employee should receive orders from and be responsible to only one superior, preventing dual subordination and affecting the individual employee. Unity of Direction means each group of activities having the same objective must have one head and one plan, preventing overlapping and affecting the entire organisation.

Mental Revolution refers to a complete change in the attitude of both workers and management towards one another — from competition to cooperation. Taylor held that both should realise they need each other and should aim to increase the size of surplus rather than quarrel over its distribution, which would also eliminate the need for trade unions and strikes.

Fayol focused on the top level of management, developed principles from personal experience, aimed at improving overall administration, and his principles are universally applicable. Taylor focused on the shop floor level, used observation and experimentation, aimed at increasing productivity, and his methods are applicable to specialised factory situations. Fayol was a practitioner while Taylor was regarded as a scientist.

Under the Differential Piece Wage System, a standard output per worker per day is fixed. Workers who meet or exceed the standard receive a higher wage rate per unit, while those who produce below the standard receive a lower rate. This financial difference is intended to motivate inefficient workers to improve their performance.

Scalar Chain is the formal line of authority from the highest to the lowest ranks in an organisation, which should be followed during normal communication. Gang Plank is a shorter direct communication route between two employees at the same level in different lines of authority, permitted only in emergencies to prevent communication delay.

Taylor is called the Father of Scientific Management because he proposed scientific management as an alternative to the rule of thumb, analysed work scientifically to find the one best method, and coined the term 'Scientific Management' in his 1911 publication 'The Principles of Scientific Management'. Bethlehem Steel Company achieved a threefold increase in productivity by applying his principles.

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