Introduction 14 principles of Management

In the last century, organizations already had to deal with management in

practice. In the early 1900s, large organizations, such as production
factories, had to be managed too. At the time there were only few (external)
management tools, models and methods available.

Thanks to scientists like Henri Fayol (1841-1925) the first foundations were
laid for modern scientific management. These first concepts, also called
principles of management are the underlying factors for successful
management. Henri Fayolexplored this comprehensively and, as a result, he
synthesized the 14 principles of management. Henri Fayol ‘s principles of
management and research were published in the book ‘General and
Industrial Management’ (1916).

14 Principles of Management
14 principles of Management are statements that are based on a
fundamental truth. These principles of management serve as a guideline for
decision-making and management actions. They are drawn up by means of
observations and analyses of events that managers encounter in
practice. Henri Fayol was able to synthesize 14 principles of management
after years of study, namely:

1. Division of Work

In practice, employees are specialized in different areas and they have

different skills. Different levels of expertise can be distinguished within the
knowledge areas (from generalist to specialist). Personal and professional
developments support this. According to Henri Fayol specialization promotes
efficiency of the workforce and increases productivity. In addition, the
specialization of the workforce increases their accuracy and speed. This
management principle of the 14 principles of management is applicable to
both technical and managerial activities.

2. Authority and Responsibility

In order to get things done in an organization, management has the
authority to give orders to the employees. Of course with this authority
comes responsibility. According to Henri Fayol, the accompanying power or
authority gives the management the right to give orders to the subordinates.
The responsibility can be traced back from performance and it is therefore
necessary to make agreements about this. In other words, authority and
responsibility go together and they are two sides of the same coin.

3. Discipline

This third principle of the 14 principles of management is about obedience. It

is often a part of the core values of a mission and vision in the form of good
conduct and respectful interactions. This management principle is essential
and is seen as the oil to make the engine of an organization run smoothly.

4. Unity of Command

The management principle ‘Unity of command’ means that an individual

employee should receive orders from one manager and that the employee is
answerable to that manager. If tasks and related responsibilities are given to
the employee by more than one manager, 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.

5. Unity of Direction

This management principle of the 14 principles of management is all about

focus and unity. All employees deliver the same activities that can be linked
to the same objectives. All activities must be carried out by one group that
forms a team. These activities must be described in a plan of action. The
manager is ultimately responsible for this plan and he monitors the progress
of the defined and planned activities. Focus areas are the efforts made by
the employees and coordination.

6. Subordination of Individual Interest

There are always all kinds of interests in an organization. In order to have

an organization function well, Henri Fayol indicated that personal interests
are subordinate to the interests of the organization (ethics). The primary
focus is on the organizational objectives and not on those of the individual.
This applies to all levels of the entire organization, including the managers.
7. Remuneration

Motivation and productivity are close to one another as far as the smooth
running of an organization 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.

8. The Degree of Centralization

Management and authority for decision-making process must be properly

balanced in an organization. This depends on the volume and size of an
organization including its hierarchy.

Centralization implies the concentration of decision making authority at the

top management (executive board). Sharing of authorities for the decision-
making process with lower levels (middle and lower management), is
referred to as decentralization by Henri Fayol. Henri Fayol indicated that an
organization should strive for a good balance in this.

9. Scalar Chain

Hierarchy presents itself in any given organization. This varies from senior
management (executive board) to the lowest levels in the
organization. Henri Fayol ’s “hierarchy” management principle states that
there should be a clear line in the area of authority (from top to bottom and
all managers at all levels). This can be seen as a type of management
structure. Each employee can contact a manager or a superior in an
emergency situation without challenging the hierarchy. Especially, when it
concerns reports about calamities to the immediate managers/superiors.

10. Order

According to this principle of the 14 principles of management, employees in

an organization must have the right resources at their disposal so that they
can function properly in an organization. In addition to social order
(responsibility of the managers) the work environment must be safe, clean
and tidy.
11. Equity

The management principle of equity often occurs in the core values of an

organization. According to Henri Fayol, employees must be treated kindly
and equally. Employees must be in the right place in the organization to do
things right. Managers should supervise and monitor this process and they
should treat employees fairly and impartially.

12. Stability of Tenure of Personnel

This management principle of the 14 principles of management represents

deployment and managing of personnel and this should be in balance with
the service that is provided from the organization. Management strives to
minimize employee turnover and to have the right staff in the right place.
Focus areas such as frequent change of position and sufficient development
must be managed well.

13. Initiative

Henri Fayol argued that with this management principle employees should
be allowed to express new ideas. This encourages interest and involvement
and creates added value for the company. Employee initiatives are a source
of strength for the organization according to Henri Fayol. This encourages
the employees to be involved and interested.

14. Esprit de Corps

The management principle ‘esprit de corps’ of the 14 principles of

management stands for striving for the involvement and unity of the
employees. Managers are responsible for the development of morale in the
workplace; individually and in the area of communication. Esprit de corps
contributes to the development of the culture and creates an atmosphere of
mutual trust and understanding.

In conclusion on the 14 Principles of management

The 14 principles of management can be used to manage organizations and

are useful tools for forecasting, planning, process management, organization
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 organizations. 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.

Frederick Taylor and Scientific Management

How did current management theories develop?

People have been managing work for hundreds of years, and we can trace
formal management ideas to the 1700s. But the most significant developments
in management theory emerged in the 20th century. We owe much of our
understanding of managerial practices to the many theorists of this period, who
tried to understand how best to conduct business.

Historical Perspective
One of the earliest of these theorists was Frederick Winslow Taylor. He started
the Scientific Management movement, and he and his associates were the first
people to study the work process scientifically. They studied how work was
performed, and they looked at how this affected worker productivity. Taylor's
philosophy focused on the belief that making people work as hard as they could
was not as efficient as optimizing the way the work was done.

In 1909, Taylor published "The Principles of Scientific Management." In this,

he proposed that by optimizing and simplifying jobs, productivity would
increase. He also advanced the idea that workers and managers needed to
cooperate with one another. This was very different from the way work was
typically done in businesses beforehand. A factory manager at that time had
very little contact with the workers, and he left them on their own to produce the
necessary product. There was no standardization, and a worker's main
motivation was often continued employment, so there was no incentive to work
as quickly or as efficiently as possible.

Taylor believed that all workers were motivated by money, so he promoted the
idea of "a fair day's pay for a fair day's work." In other words, if a worker didn't
achieve enough in a day, he didn't deserve to be paid as much as another worker
who was highly productive.
With a background in mechanical engineering, Taylor was very interested in
efficiency. While advancing his career at a U.S. steel manufacturer, he designed
workplace experiments to determine optimal performance levels. In one, he
experimented with shovel design until he had a design that would allow workers
to shovel for several hours straight. With bricklayers, he experimented with the
various motions required and developed an efficient way to lay bricks. And he
applied the scientific method to study the optimal way to do any type of
workplace task. As such, he found that by calculating the time needed for the
various elements of a task, he could develop the "best" way to complete that
task.

These "time and motion" studies also led Taylor to conclude that certain people
could work more efficiently than others. These were the people whom managers
should seek to hire where possible. Therefore, selecting the right people for the
job was another important part of workplace efficiency. Taking what he learned
from these workplace experiments, Taylor developed four principles of
scientific management. These principles are also known simply as "Taylorism".

Four Principles of Scientific Management

Taylor's four principles are as follows:

1. Replace working by "rule of thumb," or simple habit and common sense, and
instead use the scientific method to study work and determine the most
efficient way to perform specific tasks.
2. Rather than simply assign workers to just any job, match workers to their
jobs based on capability and motivation, and train them to work at maximum
efficiency.
3. Monitor worker performance, and provide instructions and supervision to
ensure that they're using the most efficient ways of working.
4. Allocate the work between managers and workers so that the managers spend
their time planning and training, allowing the workers to perform their tasks
efficiently.

Critiques of Taylorism
Taylor's Scientific Management Theory promotes the idea that there is "one
right way" to do something. As such, it is at odds with current approaches such
as MBO (Management By Objectives), Continuous
Improvement initiatives, BPR (Business Process Reengineering), and other
tools like them. These promote individual responsibility, and seek to push
decision making through all levels of the organization.
The idea here is that workers are given as much autonomy as practically possible, so
that they can use the most appropriate approaches for the situation at hand. (Reflect
here on your own experience – are you happier and more motivated when you're
following tightly controlled procedures, or when you're working using your own
judgment?) What's more, front line workers need to show this sort of flexibility in a
rapidly-changing environment. Rigid, rules-driven organizations really struggle to adapt
in these situations.

Teamwork is another area where pure Taylorism is in opposition to current practice.

Essentially, Taylorism breaks tasks down into tiny steps, and focuses on how each
person can do his or her specific series of steps best. Modern methodologies prefer to
examine work systems more holistically in order to evaluate efficiency and maximize
productivity. The extreme specialization that Taylorism promotes is contrary to modern
ideals of how to provide a motivating and satisfying workplace.

Where Taylorism separates manual from mental work, modern productivity

enhancement practices seek to incorporate worker's ideas, experience and knowledge
into best practice. Scientific management in its pure form focuses too much on the
mechanics, and fails to value the people side of work, whereby motivation and
workplace satisfaction are key elements in an efficient and productive organization.

Key Points

The Principles of Taylor's Scientific Management Theory became widely practiced,

and the resulting cooperation between workers and managers eventually developed
into the teamwork we enjoy today. While Taylorism in a pure sense isn't practiced
much today, scientific management did provide many significant contributions to the
advancement of management practice. It introduced systematic selection and training
procedures, it provided a way to study workplace efficiency, and it encouraged the
idea of systematic organizational design.

Nonprofit Organizations (Definition and Examples)

Definition
Nonprofit organizations are organized for a public or mutual benefit other than
generating profit for owners or investors (Salamon 1999). They can take a variety of
forms from informal neighborhood associations, soup kitchens, local churches or
traditional charities serving the poor to labor unions, self- help groups or museums,
hospitals and large universities. Though may be different in size and form, nonprofit
organizations share five common characteristics: 1. they are organized, 2. private
(separate from the government) 3. self-governing, 4. non-profit-distributing and 5.
voluntary. The non-profit distributing characteristic means that – contrary to the
common belief – nonprofits can generate profit but they cannot distribute it to owners
or directors. The profit must all be used to support the operation of the organization
(Anheier 2014).
The legal form of nonprofits can vary too, however, the Internal Revenue Code
differentiates two major types: the 501 (c) (3) and the 501 (c) (4) organizations.
Although both types are exempt from taxation, only the 501 (c) (3)s or the so-called
public benefit organizations are eligible for tax-deductible donations from individuals
or corporations. 501 (c) (4)s are called social welfare organizations, many civic
leagues and advocacy organizations which represent social and political causes belong
to this group (Anheier 2014). Some nonprofits - like Planned Parenthood – have both
types of 501 (c) organizations incorporated.
Nonprofits can be grouped based on their field of interest as well. The National
Taxonomy of Exempt Entities Core Codes classifies 10 groups: 1. arts, culture and
humanities 2. education 3. environment and animals 4. health 5. human services 6.
international, foreign affairs 7. public, societal benefit 8. religion related 8.
mutual/membership benefit 10. unknown, unclassified (Ott and Dicke 2016).
Historical Roots
Volunteers have formed groups to help people in need or to promote cultural, social or
educational causes since the early history of the United States. In colonial times,
Americans already liked to think of themselves as a “self-governing nation” who did
not trust governmental involvement and preferred to address social problems locally
(Ott and Dicke 2016, 59). Charity was seen as a religious duty and people in need
could rely on their neighbors or the community to help them. Churches collected
money for the needy while the wealthy founded schools such as Harvard and Yale
Colleges.
To solve the problem of poverty and strengthen civic virtues in citizens, Benjamin
Franklin advocated for mutual aid and educational groups. His ideas proved to be
popular and by the time the famous Frenchmen, Alexis de Tocqueville traveled the
US in the early 19th century, he could observe an immense number of associations (Ott
and Dicke 2016). One of the most important movements of the century was the
abolition movement which was also fueled by churches and nonprofit organizations
fighting for the end of slavery. After the Civil War, newly freed slaves received help
from the Freedman’s Bureau established by the federal government and from the
numerous self-help groups former slaves themselves formed. In the next decades,
people in northern states started to establish national associations to address a wide-
range of social issues. These organizations had paid staff and critics considered them
as bureaucracies who substitute “traditional links of personal charity” to impersonal
services (Ott and Dicke 2016, 62).
Until the 1930s, wealthy individuals and foundations provided most of the revenue for
nonprofit organizations. After the Great Depression, the vast number of impoverished
citizens made the federal government provide a wider range of social services such as
public programs for the unemployed or benefits for the elderly and dependent children
(Ott and Dicke 2016). The roles of the public, nonprofit and the for-profit sector were
also clarified. By the mid-twentieth century the growing endowments of private
foundations – which are founded by individuals or corporations and not by the
government – created a public need for greater regulation of foundations. The Tax
Reform Act in 1969 created two new regulations: 1. foundations had to distribute at
least 5 percent of their assets yearly (called payout) 2. and they had to report their
income and expenses on the 990 tax form.
The twentieth century saw two more shifts regarding the role of federal government in
providing social services. During Lyndon Johnson’s presidency in the 1960s, the
“Great Society” legislation created a wide range of support for community projects
helping people in need (Ott and Dicke 2016). The Reagan administration in the 1980’s
greatly cut federal support for such services and moved the responsibility to provide
funding to these programs to state and local governments. Therefore nonprofit
organizations had to compete for a reduced pool of resources. This led to increased
fundraising efforts and a growing public demand for accountability regarding
nonprofit’s finances and operations.
Importance
The size of the sector in the United States is much larger than many would imagine.
According to the National Center for Charitable Statistics, in 2016, more than 1.5
million organizations were registered with the IRS. It is estimated that many more
small formal and informal associations exist that do not register because religious
organizations and organizations with revenues of less than $5,000 per year are not
required to do so (Payton and Moody, 2008). The nonprofit sector is a significant
economic force, in 2013, it contributed to 5.4% of the country’s GDP and it accounted
for 9.2% of all salaries and wages.
The population of the US has a generous attitude toward the sector: in 2013, more
than a quarter of the adult population volunteered an estimated total of 8.1 billion
hours (Giving USA 2016). Total charitable giving in 2015 reached $373.25 billion,
making it America’s most generous year – although giving is steady as a percentage
of GDP, at around 2%. Most of the giving came from individuals, who account for
71% of all donations. Giving by foundations followed by 16%, bequests contributed
9% and corporations by 5%. The most popular recipients are religious organizations,
they received 32% of all charitable giving. Educational organizations are second by
15% while human service organizations were donated 12%.
Ties to the philanthropic sector
Nonprofit organizations make up the nonprofit sector which is also often referred to as
the philanthropic sector, the third sector, the independent or the voluntary sector. The
sector fulfills crucial functions for modern societies. According to Payton and Moody
(2008), the philanthropic sector’s five roles are:

1. Service role: “providing services (especially when the other sectors fail to
provide them) and meeting needs” (Payton and Moody 2008, 34).
2. Advocacy role: representing and advocating for the interests of particular
populations, for differing views of the public good and for reform.
3. Cultural role: expressing and preserving values, traditions and other aspects of
culture.
4. Civic role: building community, fostering civic engagement.
5. Vanguard role: providing opportunities for innovation, experimentation.

To learn more about the nonprofit sector, read the related briefing paper on
Philanthropy.
Key related concepts
There are several theories that explain why nonprofits exist. Some of them – such as
the market failure, the contract failure and the government failure theory – are based
on economic arguments, while others focus on ideas related to politics and
communities.
Market failure theory: according to the market failure theory, the market system is
good at supplying private goods, which are things that we consume individually such
as cars or food. However, markets have a problem providing public or collective
goods which are goods that “can only be consumed collectively, such as clean air,
national defense or safe neighborhoods” (Ott and Dicke 2016, 229). The difficulty
with public goods is that incur the “free-rider” problem which means that people who
do not pay for these goods cannot be excluded from its benefits. Therefore, no one has
the incentive to pay the costs of these services. The government can solve this
problem by taxation, making everyone pay for national defense for example by their
taxes. However, government has its own limitations as well therefore nonprofits often
complement the public sector in providing public goods.
Government failure: government can overcome the “freerider” problem, however it
has its own limitations (Ott and Dicke 2016) Citizens seldom have a complete
agreement on what public goods should be provided. Some people – for example
citizens who belong to certain religious, ethnic or other minority groups - have needs
that most other voters do not. Government usually responds to the “average” voter, to
the needs of the majority. Therefore minority needs are often satisfied by nonprofit
organizations. This theory predicts that one can find the most active nonprofit sector
in areas where the population is most diverse since many different needs have to be
met in such places.
Voluntary failure: this expression refers to “situations in which nonprofits cannot
adequately provide a service or address a social problem at a scale necessary for its
alleviation” (Anheier 2014). Donations and other type of nonprofit revenue sources
are often not enough to provide the service to everyone who needs it.
Political theories of nonprofit organizations: nonprofits are not only service
providers but they also create opportunities for collective action, „for the mobilization
of the disadvantaged” or for „the expression of diversity” (Ott and Dicke 2016, 147)
Therefore, as the pluralist theory (Leroux and Fenney 2015) suggests they are crucial
in maintaining a healthy democracy and in representing the interests of different
interest groups. Many also argue that nonprofit organizations help maintaining
democracy by building citizenship and community leadership skills, by preparing
potential political leaders and by providing educational and networking opportunities
for those who have been excluded from such circles (Ott and Dicke 2016). Many
argue that volunteering encourages „good citizenship” by: 1. building trust, 2. helping
people better understand the social and political system, 3. breeding more
participation in local issues 4. teaching civic skills and increasing self-efficacy and 5.
by making people more aware of social problems (Ott and Dicke 2016).
Community theories of nonprofit organizations: see under the briefing paper on
community.
NGO (nongovernmental organization): it is a relatively new term which is used
most often in international relations and developing countries. It most often means
“more professionalized organizations promoting economic and social development, as
differentiated from more grassroots, community-based associations” (Anheier 2014,
61). The expression is mostly used outside of the US and it differentiates philanthropy
from the state. In the US, the term “nonprofit” is more common and it distinguishes
philanthropy from the business sector.