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Principles of General Management

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McDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth. A McDonald’s restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation’s revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald’s revenues grew 27 percent over the three years ending in 2007 to $22.8 billion, and 9 percent growth in operating income to $3.9 billion. McDonald’s primarily sells hamburgers, cheeseburgers, chicken, french fries, breakfast items, soft drinks, milkshakes and desserts.

In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies and fruit. The business began in 1940, with a restaurant opened by brothers Richard and Maurice McDonald at 1398 North E Street at West 14th Street in San Bernardino, California. Their introduction of the “Speedee Service System” in 1948 furthered the principles of the modern fast-food restaurant that the White Castle hamburger chain had already put into practice more than two decades earlier. The original mascot of McDonald’s was a man with a chef’s hat on top of a hamburger shaped head whose name was “Speedee”. Speedee was eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S. trademark on a clown shaped man having puffed out costume legs. Ronald McDonald’s first appearance was in 1963. It was created by Williard Scott.

Henri Fayol (1841 – 1925) was a French management theorist whose theories concerning scientific organization of labour were widely influential in the beginning of the twentieth century. He graduated from the mining academy of St. Etienne in 1860 in mining engineering. The 19 year old engineer started at the mining company ‘Compagnie de commentary-Fourchambean-Decazeville’, ultimately acting as its managing director from 1888 to 1918. His theories deal with the organization of production in the context of a competitive enterprise that has to control its production costs. Fayol was the first to identify the four functions of management – Planning, Organizing, Directing and Controlling, although his version was a bit different – Plan, Organize, Command, Coordinate and Control. According to Fayol, all activities of an industrial undertaking could be divided into: Technical, Commercial, Financial, Security, Accounting and Managerial.

He also suggested that the qualities a manager must possess should be – Physical, Moral, Education, Knowledge and Experience. He believed that the number of management principles that might help to improve an organization’s operation is potentially limitless. Based largely on his own experience, he developed his concept of administration. The 14 principles of management propounded by him were discussed in detail in his book published in 1917, ‘Administration Industrielle et Generale’. It was published in English as ‘General and Industrial Management’ in 1949 and is widely considered as a foundational in classical management theory. For his contribution, he is also known as the ‘Father of General Management’. The fourteen principles of management given by him are :

1. Division of Work : According to Fayol, ‘The intent of division of work is to produce more and better work for the same effort. Specialization is the most efficient way to use human effort’. Henry Fayol has stressed on the specialization of jobs. He recommended that work of all kinds must be divided & subdivided and allotted to various persons according to their expertise in a particular area. Subdivision of work makes it simpler and results in efficiency. It also helps the individual in acquiring speed, accuracy in his performance. Specialization leads to efficiency & economy in spheres of business.

2. Authority and Responsibility : According to Fayol, ‘Authority is the right to give orders and obtain obedience, and responsibility is the corollary of authority. The two types of authority are official authority, which is the authority to command, and personal authority which is the authority of the individual manager. Authority & responsibility are co-existing. If authority is given to a person, he should also be made responsible. In a same way, if anyone is made responsible for any job, he should also have concerned authority. There should be a balance between the two i.e. they must go hand in hand. Authority without responsibility leads to irresponsible behavior whereas responsibility without authority makes the person ineffective.

3. Discipline : Discipline is the obedience to organizational rules and employment agreement which are necessary for the working of the organization. According to Fayol, ‘Discipline requires good superiors at all levels, clear and fair agreements and judicious application of penalties. This principle applies that subordinate should respect their superiors and obey their order. It is an important requisite for smooth running of the enterprise. Discipline is not only required on path of subordinates but also on the part of management. Discipline can be enforced if – – There are good superiors at all levels. – There are clear & fair agreements with worker – Sanctions (punishments) are judiciously applied .

4. Unity of Command : According to Fayol, there should be one and only one boss for every individual employee. If an employee gets orders from two superiors at the same time, the principle of unity is violated. The principle of unity of command states that each participant in a formal organisation should receive orders from and be responsible to only one superior. In other words, a sub-ordinate should not receive instructions from more than one person because –

– It undermines authority
– Weakens discipline
– Divides loyalty
– Creates confusion
– Delays and chaos
– Escaping responsibilities
– Duplication of work
– Overlapping of efforts

Therefore, dual sub-ordination should be avoided unless and until it is absolutely essential. Unity of command provides the enterprise a disciplined, stable & orderly existence. It creates harmonious relationship between superiors and sub-ordinates.

5. Unity of Direction : According to this principle, each group of activities having the same objective must have one head and one plan. This ensures unity of action and coordination. Related activities should be grouped together. There should be one plan of action for them and they should be under the charge of a particular manager. According to this principle, efforts of all the members of the organization should be directed towards common goal. Without unity of direction, unity of action cannot be achieved. In fact, unity of command is not possible without unity of direction.

6. Subordination of Individual Interest to General Interest : The interest of an organisation should take priority over the interests of any one individual employee. As far as possible, reconciliation should be achieved between individual and group interests. But in case of conflict, individual must sacrifice for bigger interests. In order to achieve this attitude, it is essential that – – Employees should be honest & sincere. – Proper & regular supervision of work. – Reconciliation of mutual differences and clashes by mutual agreement. For example, for change of location of plant, for change of profit sharing ratio, etc. 7. Remuneration of Employees : The overall pay and compensation should be fair to both employees and the organisation. Wages should be determined on the basis of cost of living, work assigned, financial position of the business, wage rate prevailing etc. Logical & appropriate wage rates and methods of their payment reduce tension & differences between workers & management creates harmonious relationship and pleasing atmosphere of work.

Fayol also recommended provision of other benefits such as free education, medical & residential facilities to workers. 8. Centralisation and Decentralisation : The concentration of decision-making authority is called centralization whereas its dispersal among more than one person is known as decentralization. According to Fayol, ‘There is a need to balance subordinate involvement through decentralization with managers’ retention of final authority through centralization’. Anything which increases the role of subordinate is decentralization & anything which decreases it is centralization. Fayol suggested that absolute centralization or decentralization is not feasible. An organization should strike to achieve a lot between the two.

9. Scalar Chain : An organisation consists of superiors and subordinates. The formal lines of authority from highest to lowest ranks are known as scalar chain. According to Fayol, ‘Organisations should have a chain of authority and communication that runs from top to bottom and should be followed by managers and the subordinates’. Every orders, instructions, messages, requests, explanation etc. has to pass through Scalar chain. But, for the sake of convenience & urgency, this path can be cut shirt and this short cut is known as Gang Plank. A Gang Plank is a temporary arrangement between two different points to facilitate quick & easy communication as explained below:

In the figure given, if D has to communicate with G he will first send the communication upwards with the help of C, B to A and then downwards with the help of E and F to G which will take quite some time and by that time, it may not be worth therefore a gang plank has been developed between the two.

Gang Plank clarifies that management principles are not rigid rather they are very flexible. They can be moulded and modified as per the requirements of situations. 10. Order : The principle of order states that every material and human resource should have a fixed place in the organisation so that there will be no hindrances in the activities of the business organisation. Arrangement of things is called material order and placement of people is called social order. Material order- There should be safe, appropriate and specific place for every article and every place to be effectively used for specific activity and commodity. Social order- Selection and appointment of most suitable person on the suitable job. There should be a specific place for every one and everyone should have a specific place so that they can easily be contacted whenever need arises. 11. Equity : There should be no discrimination against anyone on account of sex, religion, language, caste, belief or nationality, etc. The employees should be treated with kindness & equity if devotion is expected of them. It implies that managers should be fair and impartial while dealing with the subordinates. Equity is essential to create and maintain cordial relations between the managers and sub-ordinate. But equity does not mean total absence of harshness.

Fayol was of opinion that, “at times force and harshness might become necessary for the sake of equity”. 12. Stability of Personnel : Personnel once selected should be kept in the post/position for a minimum fixed tenure. They should be given reasonable time to show results. Any adhocism in this regard will create instability/insecurity among employees. They would tend to leave the organisation. Recruitment, selection and training cost will be high. Stability of job creates team spirit and a sense of belongingness among workers which ultimately increase the quality as well as quantity of work. 13. Initiative : A good company should have an employee suggestion system whereby initiative/suggestions which result in substantial cost/time reduction should be rewarded. Workers should be encouraged to take initiative in the work assigned to them.

It means eagerness to initiate actions without being asked to do so. Fayol advised that management should provide opportunity to its employees to suggest ideas, experiences& new method of work. It helps in developing an atmosphere of trust and understanding. People then enjoy working in the organization because it adds to their zeal and energy. They can be encouraged with the help of monetary & non-monetary incentives. 14. Espirit De Corps : It refers to team spirit i.e. harmony in the work groups and mutual understanding among the members. Fayol cautioned the managers against dividing the employees into competing groups because it might damage the moral of the workers and interest of the undertaking in the long run. To inculcate Espirit De’ Corps following steps should be undertaken – -There should be proper co-ordination of work at all levels – Subordinates should be encouraged to develop informal relations among themselves.

– Efforts should be made to create enthusiasm and keenness among subordinates so that they can work to the maximum ability. – Efficient employees should be rewarded and those who are not up to the mark should be given a chance to improve their performance. – Subordinates should be made conscious of that whatever they are doing is of great importance to the business & society.

He also cautioned against the more use of Britain communication to the subordinates i.e. face to face communication should be developed. The managers should infuse team spirit & belongingness. There should be no place for misunderstanding. People then enjoy working in the organization & offer their best towards the organization.

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