January 16, 2017

Operational Management Theory - Henri Fayol

Book - General and Industrial Management - Administration
Henri Fayol



Main Topics Covered
Management Definition and Introduction
Elements of Management – planning, organizing, command, co-ordination, control.
General Principles of Management


Administration - Management
 To manage or administer  is to forecast and plan, to organize, to command, to co-ordinate and to control.
To forecast and plan means to foresee – examining the future and drawing up the plan of action.
To organize means building up the dual structure, material and human, of the undertaking.

To command means maintaining activity among the personnel.
To co-ordinate means binding together, unifying and harmonizing all activity and effort.
To control means seeing that everything occurs in conformity with established rule and expressed command.

Difference between Government and Management – Administration

To govern is to conduct the undertaking towards its objective by seeking to derive optimum advantage from all available resources and to assure the smooth working of the six essential functions.
Management –administration is merely one of the six functions whose smooth working government has to ensure, but it has such a large place in the part played by higher managers that sometimes this part seems exclusively managerial.


Six Groups of Activities – Functions in an industrial undertaking
1. Technical – production, manufacture, adaptation
2. Commercial – buying, selling, exchange
3. Financial – search for and optimum use of capital
4. security – Protection of property and persons
5. Accounting – stocktaking, balance sheet, costs, statistics
6. Managerial – Administrative – planning, organization, command, co-ordination, control.


Elements of Management

1. Planning
2. Organizing
3. Command
4. Co-ordination
5. Control

1. Planning – Foresight is Essential Part of Management



Maxim “Managing means looking ahead.”
The above maxim gives an idea of the importance attached to looking ahead in the business world.
If foresight is not the whole of management at least it is an essential part of it.
Planning in this context means both to assess the future and make provision for it.
Planning gets manifested in variety of ways.

Planning

Managing or administering means foreseeing and making provision for it such that organizational objectives are met.
To foresee means to assess the future (first part of the planning process) and next part of the planning is to make provision for the foreseen future.
Plan of action is the chief manifestation of planning.
The plan of action includes the result envisaged, the line of action to be followed, the stages to go through, and methods to use.

Plan of Action

Plan of action depends upon what is wanted and what is possible.

In the plan of action, proximate events are outlined with some distinctness, whilst remote events appear progressively less distinct, and it entails the running of the business as foreseen and provided against over a definite period.


Plan of action rests:
1. on the firm’s resources
2. on the nature and importance of work in progress
3. on future trends which depend partly on technical, commercial, financial and other conditions all subject to change, whose importance and occurrence cannot be pre-determined.

Line of Conduct
In line of conduct it is not only imperative that nothing should clash with principles and rules of good management, but also that the arrangement adopted should facilitate application of these principles and rules.

Broad Features of a Good Plan of action

Unity of plan
The guiding action of the plan must be continuous.
The plan should be flexible enough to bend before such adjustments, as it is considered well to introduce, whether from pressure of circumstances or from any other reason.
Plan must have as much accuracy as is compatible with the unknown factors bearing on the fate of the concern.

Organizing

To organize a business is to provide it with everything useful to its functioning: raw materials, tools, capital, personnel.
*All this may be divided into two main sections, the material organization and the human organization.
*The latter only is dealt with in this paper.

Managerial Duties of an Organization


1. Ensure that the plan is judiciously prepared and strictly carried out.
See that the human and material organization is consistent with the objective, resources, and requirements of the concern.
3. Set up a single, competent energetic guding authority.
4. Harmonize activities and co-ordinate efforts.
5. Formulate clear, distinct, precise decisions.

6. Arrange for efficient selection: Each  department must have an employees in places where they can render greatest service.
7.Define duties clearly.
8. Encourage a liking for initiative and responsibility
9. Have fair and suitable recompense for services rendered.
10. See to the maintenance of discipline.

11. See to the maintenance of discipline.
12. Ensure that individual interests are subordinated to the general interest.
13. Pay special attention to unity of command
14. Supervise both material and human order.
15. Have everything under control.
16. Fight against excess of regulations, red tape and paper control


Organs or Members of the Body Corporate


1. Shareholders
2. Board of Directors
3. General Management
4. Regional and Local Management      
          Taylor System (Was described by Fayol af ter the description of Regional and Local Management and Before the topics below)
5 – 9 Chief Engineers, Departmental Heads, Sub-departmental heads, Superintendents, Foremen, Operatives

Taylor System


Taylor’s thought: Almost all shops are underofficered.
Under the military type of organization, the foreman or gang-boss is held responsible for the successful running of the entire shop.

To achieve the successful running of the shop especially the machine shop:

The foreman must be a good machinist.
He must be able to read drawings readily and have sufficient imagination to see the work in its finished state.
He must plan ahead and see that the right jigs, clamps and appliances, as well as proper cutting tools, are on hand, and are used to set the work correctly in the machine cut the metal at the right speed and in good order.
He must see that each man turns out work of the proper quality.
He must see that men under him work steadily and  fast.
He must constantly look ahead over the whole field of work and see that the parts go to the machines in their proper sequence and that the right job gets to the each machine.
He must at least in a general way, supervise the timekeeping and fix piecework rates.
He must discipline the men under him and readjust their wages.

If a man who could do all the above could be found, he should be made manager or superintendent of a works instead of being made a gang-boss.

Instead of the military type of one gang-boss, it is advisable to utilize functional type of foremanship wherein there are multiple foremen and each is responsible for a limited number of activities among the nine listed.

Taylor proposed two steps
First: As far as possible the workmen, as well as the gang-bosses and foremen, should be entirely relieved of the work of planning, and of all work which is more or less clerical in its nature.

Second: Thoughout the whole field of management the military type of organization should be abandoned and what may be called the ‘functional type’ be substituted in its place.

Fayol’s Comment on the Taylor System


It turns on the two following ideas –
1. Need for a staff to help out shop foremen.
2. Negation of the principle of unity of command

The first seems to me to be good.
The second seems unsound and dangerous.

Need for Staff to Help out Shop Foremen
Taylor demonstrated the complexity and weight of responsibility laid upon men in charge of large mechanical engineering shop.
As a remedy for this, Taylor suggested that specialists must help the foreman.
Such a mechanism is also required in the repair shops of large mining, metallurgical or other concerns and also in workshops of kinds.
I consider that Taylor has rendered great service in drawing attention to the importance of such a mechanism and to the manner of instituting it.

Negation of the Principles of Unity of Command
Let us treasure the old type of organization in which unity of command is honoured.
It can be easily reconciled with Taylor’s ideas with the assistance being given to superintendents and foremen.
We may hope that the example of the great American engineer may be followed in this respect by many of our own fellow

Selection

Selection consists in obtaining the requisite employees for building up the organization, and is among the most important and most difficult of business activities, and exerts considerable influence on their fate.
Training by Employer
When he has first left school, the industrial worker is merely an apprentice, workman apprentice, foreman-apprentice, engineer-apprentice, manager-apprentice.
Even if he has specialized in his studies his training is still incomplete, for he lacks experience in the industrial milieu wherein the human factor and commercial struggle have an importance of which it is difficult to give a precise idea at school.


Command

The mission of command is set the organization going.
For every manager the object of command to get the optimum return from all employees of his unit in the interest of the whole concern.

Precepts that Facilitate Command

1. Have a thorough knowledge of personnel.
2. Eliminate the incompetent.
3. Be well versed in the agreements binding the business and its employees.
4. Set a good example.
5. Conduct periodic audits of the organization and use summarized charts to further this.
6. Bring together chief assistants by means of conferences at which unity of command and focussing  of effort are provided for.
7. Do not become engrossed in detail.
8. Aim at making unity, energy, initiative and loyalty prevail among the personnel.


4. Co-ordination

To co-ordinate is to harmonize all the activities of a concern so as to facilitate its working, and its success.
It is to keep expenditure proportional to financial resources, equipment and tools to production needs, stocks to rate of consumption, sales to production.

In a Well Co-ordinated Enterprise

1. Each department works in harmony with the rest.
Production knows its target, Finance provides necessary funds and stores procures what is needed.
2. In each department divisions and sub-divisions are precisely informed as to the share they must take in the communal task and the reciprocal aid they are to afford one another.

Weekly Conference of the Departmental Heads

Its main aim is to inform the management about the running of the concern.
To make clear co-operation to be expected as between various departments, and
To utilize the presence of departmental managers for solving various problems of common interest.

Importance of Co-ordinating Conference

The co-ordinating conference is to co-ordination what the plan of action is to foresight, what summarized charts of personnel are to the human organization.


Control

In an undertaking, control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued and principles established.
It has for its object to point out weaknesses and errors in order to rectify them and prevent recurrence.
It operates on everything, things, people, actions.
Control  by Supervisors and Control by Internal Control Specialists
Head of business and his assistants along the scalar chain do a lot control activity.
But there is a need for specialist controllers and inspectors.
Properly carried out, this specialist control is precious auxiliary to management and can afford it certain data which official supervision might at times fail to furnish.




Management Theory


The real reason for the absence of management teaching is absence of theory
Without theory no teaching is possible
Now there exists no generally accepted theory of management emanating from general discussion.
Theory is a collection of principles, rules, methods, procedures, tried and checked by general experience.

It is not principles which are lacking:
Who has not heard proclaimed a hundred times the need for the grand principles of authority, discipline, subordination of individual interest to the common good, unity of direction, co-ordination of effort, foresight, etc.?
But a principle bereft of the means of putting it into practice is of no avail.

Nor is there any lack of methods:
Their name is legion.
But general public is not in a position to pass judgment on managerial activity.
Hence the importance of establishing a theory of management as soon as possible.
Few industrial leaders should set forth their personal views on the general principles which they consider most calculated to promote smooth running and on the means most  conducive to the realization of such principles.

The stream of discussion has to be started by one and once started the discussion will flow.
Even the slightest comment by an expert is of value in discussion.
I am trying to start the discussion by publishing this survey and I hope that a theory will emanate from it.

Fayol – Management Principles



Fayol wrote in his book, "I am going to review some of the principles of management which I have most frequently had to apply;"

1. Division of work.
2. Authority
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of individual interests to the general interest.
7. Remuneration
8. Centralization
9. Scalar chain (line of authority)
10. Order
11. Equity
12. Stability of tenure of personnel
13. Initiative
14. Esprit de corps


Division of Work
The object of division of work is to produce more and better work with the same effort.

Although its advantages are universally recognized and although possibility of progress is inconceivable without the specialized work of learned men and artists, yet division of work has its limits which experience and a sense of proportion teach us may not be exceeded.
2.Authority and Responsibility
Authority  is the right to give orders and the power to exact obedience.
There is a manager’s official authority.
There is also personal authority, compounded of intelligence, experience, moral worth, ability to lead, past services etc.
Personal authority is the indispensable complement of official authority.
3. Discipline
Discipline is respect for agreements which are directed at achieving obedience,application, energy,and the outward marks of respect.
The best means of establishing and maintaining it are –
1. Good suppliers at all levels.
2. Agreements as clear and fair as possible.
3. Sanctions [penalties] judiciously applied.
4. Unity of Command
For any action whatsoever, an employee should receive orders from one superior only.
5. Unity of Direction
One head and one plan for a group of activities having the same objective.
6. Subordination of individual interests to the general interest.
Two interests of a different order, but claiming equal respect, confront each other.
Means must be found to reconcile them.
It represents one of the great difficulties of management.
Means of effecting it are-
1. Firmness and good example on the part of superiors.
2. Agreements as fair as is possible.
3. Constant supervision
Remuneration of Personnel
Remuneration has to be fair and as far as possible, afford satisfaction both to personnel and firm (employee and employer)
8. Centralization
The concept is similar to the brain in animals.
9. Scalar Chain
The scalar chain is the chain of superiors ranging from the ultimate authority to the lowest ranks.
This chain is followed by all communications which start from or go to the ultimate authority.
It is not always the swiftest and when swift action is required, Fayol says gang plank method can be applied.
10. Order
Order in case of material things – A place for everything and everything in its place.
Cleanliness is a corollary of orderliness, there is no appointed place for dirt.

Order in case human resources – A place for everyone and everyone in his place.
11. Equity
Equity results from the combination of kindliness and justice.
12. Stability of Tenure of Personnel
Generally, the managerial personnel of prosperous concerns is stable, that of unsuccessful ones is unstable.
13. Initiative
 Thinking out a plan and ensuring its success is one of the keenest satisfactions for an intelligent man to experience.
14. Esprit de Corps
Harmony, union among the personnel of a concern, is great strength in that concern.
Effort then should  be made to establish it.
One principle to be observed and two pitfalls to be avoided.
The principles – Unity of command
Pitfalls
(a) a misguided interpretation  of the motto “divide and rule,”
(b) the abuse of written communication.
Fayol’s Conclusion
I bring to an end this review of principles.
The list has no precise limits.
At the moment it is useful to endow management theory with a dozen or so well-established principles on which it is appropriate to concentrate general discussion.
The foregoing principles are those to which I have most often had recourse.
There must be principles, acknowledged truths regarded as proven on which to rely.

Code represents the sum total of these truths at any given moment.
Why commandments of Church are not sufficient.
The laws of religion are for the individual and for interests in the other world.
Management principles aim at the success of associations of individuals and at the satisfying of economic interests.

MBA Core Management Knowledge - One Year Revision Schedule


Joint Revision Article:  Importance of Human Relations in Management



Updated  19 January 2017,  19 Jan 2016, 30 Dec 2014

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