Today’s firms are facing stiff competition, to perform or perish, in the local, national, or international markets. This global business scenario necessitates the manufacturing and/or service establishments, such as startups, entrepreneurs, and industrialists, to gain a competitive advantage over their competing players for continuous growth, development, and survival. The elements of a business are too intricate and necessitate integrating a large number of internal and external factors in order to meet the objectives of a firm effectively and efficiently. One of the major objectives to be achieved by a firm is to get its activities and people organise. Thus, organisation is the process by which the structure of an enterprise is created and maintained. The process includes determination of specific tasks and activities to accomplish the defined objectives, grouping these activities logically, and assigning those to specific positions/persons and creation of network of positions for the purpose of planning, motivation, communication, coordination and controlling. Oliver Sheldon has defined organisation as “Process of so combining the work that individuals or groups have to perform with the facilities necessary for its execution, that the duties so performed provide the best channels for the efficient, systemic, positive, and coordinated application of the available efforts”. Thus, organisation is ‘System that integrates Men and their behaviour, Material and its movements, Information & their flow channels into a unified set or systems’.
The three major organic functions of any firm are finance, operations, and marketing. Whether the firm is small or big, service oriented or manufacturing oriented, run by few employees or many employees, the Principles of Organisation remains the same and need to be build-up for smooth operations of a firm. Despite the fact that the large organisation are more stable and resistant to environmental turbulences than small and medium businesses, management problems are more likely to occur due to their complex structure, diversification of actions, excessive bureaucracy, and localization of economic entities in other regions. An efficient structure can benefit the organisation in several ways, including making it easier to delegate responsibility and effect change throughout the organisation. To benefit from a strong framework, it is important to understand the principles of organisation and inculcate them right from its inception stage of a firm.
Principles of organisation
1. Principle of consideration of objectives: Firms simultaneously experience differentiated functions and integrated efforts to achieve their final Goal. Organisational goals, departmental goals, and individual goals must be clearly defined. All goals and objectives must have uniformity. When there is contradiction among different level of goals desired goals can’t be achieved. Therefore, unity of objectives is necessary.
2. Principle of specialization: Also known as division of labour, specialization is the process of focusing one’s occupational concentration on a specific area of expertise. We are living in a world of specialization that is witnessed in all discipline and occupations. The term specialization is hence related to tasks and employees wherein an employee takes special type of knowledge and skill in any one of the organic functions of a firm. Modern business organisation needs the specialization, skill, and knowledge by this desired sector of economy and thus, efficiency would be established.
3. Principle of coordination: In an organisation, many different materials, equipments, tools, machines and other resources are used. Coordination thus becomes important and could be achieved by group effort that emphasize on unity of action. Therefore, coordination facilitates in several management concepts and is of paramount importance. Different techniques to track customer and business interactions such as SAP (Systems, Applications, and Products) are especially well-known for its Enterprise Resource Planning (ERP) and data management programs, generally for big manufacturing firms. Startups and small firms can also install such softwares for achieving better coordination in their firms.
4. Principle of delegation of authority: Authority is related to decision-making process and is the kind of right and power through which it guides and directs the actions of others so that the organisational goals can be achieved effectively and efficiently. It is vested in particular position, not to the person because an institution gives authority and therefore it is legal. It generally flows from higher level to lowest level of management. There should be unbroken lines of well-conceived and well-designed authority.
5. Principle of delegation of responsibility: Obligation to perform the duties and task is known as responsibility. Authority and responsibility flow together and need parity. Departmental managers and other personnel take the direction from top-level management to perform the task. Authority is necessary to perform the task. It is not only authority but obligation which needs to be clearly defined and understood. Responsibility cannot be delegated neither it can be avoided. A sense of responsibility need to be inculcated at different positions in a hierarchy.
6. Principle of unity of command: The management principle ‘Unity of command’ means that an individual employee should receive orders from one manager (or superior officer) and that the employee is answerable to that manager. If more than one manager gives tasks and related responsibilities to the employee, this may lead to confusion, which may lead to possible conflicts for employees. By using this principle, the responsibility for mistakes can be established more easily.
7. Principle of Span of Control: Also known as unity of direction, unlimited subordinates cannot be supervised by a single manager. This principle thus helps to determine numerical limit of subordinates to be supervised by a manager. This improves efficiency and helps in better coordination among people. This principle usually depends upon the type of work, geographical location of supervisor, quantum of workforce etc.
8. Principle of communication: Communication is the process of transformation of information from one person to another of different levels. It involves the systematic and continuous process of telling, listening, and understanding opinions ideas, feelings, information, views etc, in flow of information. Effective means of communications need to be established in order to avoid confusion and duplication of efforts.
9. Principle of personal ability: For sound organisation, human resources is important. Employees must be capable. Able employees can perform higher. Mainly training and development programs must be encouraged to develop the skill in the employees. Talents, personal capabilities, skill, and personal interests of employees must be recognised and due should be given.
10. Principle of structural balance: The functional activities, their establishment, and other performances must be balanced properly. Authority, centralization, decentralization must also be balance equally. This is very challenging job but efficient management of firms must keep it. All the departments, sections, and functional areas of a firm should be equally strong for delivering maximum efficiency and good results to meet its overall objectives.
11. Remuneration: Motivation and productivity are close to one another as far as the smooth running of an organisation is concerned. This management principle of the 14 principles of management argues that the remuneration should be sufficient to keep employees motivated and productive. There are two types of remuneration namely non-monetary (a compliment, more responsibilities, credits) and monetary (compensation, bonus or other financial compensation). Ultimately, it is about rewarding the efforts that have been made.
12. Combination of Line and Staff Function: A firm consists of two types of functions. A line function and a staff function. A “line function” is one that directly advances an organisation in its core work. In other words, employees directly related with one of the three organic functions of a firm are performing line function whereas employees indirectly related to one of the three organic functions of a firm are performing staff function. A “staff function” supports the organisation with specialized advisory and support functions. The principle of combination of Line and Staff function says that line and staff functions should never be combined to an individual function. Hence, there need to be a clear dividing line between performances of tasks and activities relating to line and staff functions and a firm must have different employees to perform such functions.
13. Principle of flexibility: organisational structure must be flexible considering the environmental dynamism. Sometimes, dramatically change may occur in the organisation and in that condition, organisation should be ready to accept the change. They should be flexible enough to bend and blend to cope up with this external dynamics.
14. Principle of rules and regulations: Every firm must design their rules and regulations meticulously for systematic and hassle free operations. The rules and regulations will give individual or firm guidelines to follow when entering into a specific activity or transaction or transactions. ” Rules and regulations are made to enforce laws, either operational, safety, environmental etc.
The above principles of management can be used to manage organisations and are useful tools for forecasting, planning, process management, organisation management, decision-making, coordination, and control. Although they are obvious, many of these matters are still used based on common sense in current management practices in organisations. It remains a practical list with focus areas that are based on Henri Fayol ‘s research, which still applies today due to a number of logical principles. The new generation entrepreneurs, startups and business personals must imbibe these principles to achieve maximum effectiveness.
Author is the head of IIED Centre at NIT, Srinagar
saadparvez@nitsri.net