Principles of Business Administration 14 Principles You Must Follow to Run a Business

Principles of Business Administration 14 Principles You Must Follow to Run a Business 

Principles of Business Administration 14 Principles You Must Follow to Run a Business

When you think of the French mining industry in the 1890s, what comes to mind? Terrible working conditions? Catastrophic collapse? black lung? Are there principles of business management?

What about the birth of the modern work culture?

The coal mine may seem an unlikely place for the emergence of business culture and organizational management theory, but you’d be surprised.

More than a century ago, Henri Fayol, managing director of a French mining company, pioneered developments in organizational management theory by constantly replicating miners’ working conditions to uncover the optimal environment for efficiency, productivity, and happiness.

Henri Fayol, who specializes in business management, is now recognized as the father of modern management. In 1916 Fayol wrote a book entitled “Industrial and Public Administration”. In this book he presented the Fourteen Principles of Management.

14 Best Business Principles developed by business professionals are universally accepted guidelines for managers to carry out their work in accordance with their responsibilities.

Principles of business administration

1. Division of labor
2. Balancing authority and responsibility
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual interests to the public interest
7. Compensation
8. Centralization and non-centralization
9. Sequence and gradation in rank
10. Ranking
11. Justice among all members of the company
12. Stability of staff tenure
13. The initiative
14. Community spirit

 1. Division of labor

Henri believes that the separation of labor in the workforce among workers will enhance product quality. It also concluded that division of labor improves productivity, efficiency, accuracy and speed of workers. This principle is suitable for both the administrative and technical work level, and is considered one of the most important principles of business administration.

By specializing, we can spend more time honing the skills that actually help us reach our team goals, which is the best way we can help our business grow.

2. Balancing authority and responsibility

Authority must equal responsibility.

According to Henri Fayol, there must be a balance between authority (authorities) and responsibility (duties). The right to issue orders should not be considered without reference to liability.

If the authority is more than a responsibility, the manager is likely to misuse it. If responsibility is more than power, he may feel frustrated.

These are the two main aspects of management. Authority facilitates efficient running of the business, and responsibility makes them accountable for the work done under their direction or leadership.

3. Discipline

An outward sign of respect according to formal or informal agreements between the company and its employees.

Discipline means respecting the rules and regulations of the organization. The discipline may be self-discipline, or it may be coercive discipline.

No laxity or bending of the rules, not allowed in any organisation. Business must respect the rules that run the organization. To establish discipline, good supervision and impartial judgment are required.

Without discipline, nothing can be achieved. It is the core value of any project or any department. Good performance and reasonable interrelationships make the management task easy and comprehensive. Good behavior of employees also helps to build and advance their career smoothly.

4. Unity of command

According to this principle, a subordinate (employee) should have orders from only one superior (boss or manager) and receive orders.

In other words, a subordinate has to report to only one superior. Helps prevent double dependency. This reduces the potential for “double-dependence” which creates a problem that is the job of the managers.

Your employees are most successful when they have only one line manager overseeing their work. This creates a direct and genuine relationship between the two, and demonstrates the employee’s sense of direction at work.

Having two directors is not ideal for anyone. It can spread staff, lead to conflicting directives, and even split loyalty. Unless absolutely necessary, each employee should have only one manager.

5. Unity of direction

One head and one plan for a group of activities with the same goal. All activities having the same objective must be directed by a single manager, and he must use a single plan.

This is called unity of direction.

For example, all marketing activities like advertising, sales promotion, pricing policy etc. should be directed by only one manager.

He should use only one plan for all marketing activities. Unity of direction means that activities aimed at the same goal should be organized so that there is one.

Everyone involved in the same activity should have a unified goal. This means that every person working in a company should have a single goal and motivation that makes work easier and achieves the set goal easily.

6. Subordination of individual interests to the public interest

The interest of one individual or group should not prevail over the common good. Individual interest should be given the least importance, while the general interest should be given the utmost importance.

If not, the organization will collapse. The interest of the organizational objective should not be subverted by the interest of the individual or the group.

It is possible to assume that the principles of all business administration may fail if the principle of subordination of individual interests to the public interest fails.

This indicates that the company should act uniformly for the benefit of the company rather than personal interest. Be subordinate to the purposes of the organization. This refers to the entire chain of command in the company.

7. Compensation

Remuneration is the price for services received. The pay must be fair to both the employee and the company.

If the organization wants efficient and best performing employees, it must have a good remuneration policy.

This policy should give maximum satisfaction to both employers and employees. It should include financial and non-financial incentives.

This plays an important role in motivating the employees of the company. The reward can be monetary or non-monetary. However, it should be according to one’s own efforts.

8. Centralization and non-centralization

It is always present to a greater or lesser extent, depending on the size of the company and the quality of its managers. In centralization, power is concentrated in the hands of only a few.

However, in decentralization, power is distributed to all levels of management. No organization can be fully centralized or decentralized.

If there is complete centralization, the subordinates will not have any authority (authority) to carry out their responsibilities (duties). Likewise, if there is complete decentralization, the president will not have the authority to control the organisation.

Therefore, there must be a balance between centralization and decentralization.

The degree of centralization or decentralization depends on the specific organisation, but managers must retain ultimate responsibility but must give subordinates sufficient authority to carry out tasks successfully.

Centralization is a very important principle among the 14 Business Principles.

In any company, the management or any authority responsible for the decision-making process must be impartial. However, this depends on the size of the organization. Henri Fayol stressed the need for a balance between hierarchy and the division of power.

9. Sequence and gradation in rank

The chain of command, sometimes called the scalar chain, is the formal line of authority, communication, and responsibility within an organization.

The chain of command is usually depicted on an organizational chart, which defines the superior and subordinate relationships in the organizational structure.

Or is the line of authority from top to bottom of the organization. This chain applies the principle of unity of command and allows for the orderly flow of information.

Under the principle of unity of command, instructions flow downward along the chain of command and accountability flows upward.

The clearer the chain of command, the more effective the decision-making process and the greater the efficiency.

Fayol highlights this principle that the hierarchy should be from highest to lowest. This is necessary so that each employee knows his immediate superior and also must be able to contact anyone, if necessary.

10. Ranking

A place for everything and everything in its place “The right man in the right place. There should be an order of materials/things and people in the organisation.

The order of things is called the “physical order” and the order of people is called the “social order.” The arrangement of materials refers to “a place for everything and everything in its place”.

The social system refers to choosing the “right man in the right place”.

There should be an orderly placement of resources like men and women, money, materials, etc. Human and material resources must be in the right place at the right time. Wrong placement will lead to misuse and disorder.

The company must maintain a well-defined work order to have a favorable work culture. A positive workplace climate will promote positive productivity.

11. Justice among all members of the company

All employees must be treated equally and respectfully. It is the manager’s responsibility that no employee be discriminated against.

While dealing with the employees, the manager should use kindness and justice towards the employees equally. Fairness is a combination of kindness and justice.

It creates loyalty and dedication in employees towards the organisation. The principle of fairness indicates that managers should be kind and fair to subordinates.

12. Stability of staff tenure

Although it may take a lot of time, employees need to be given enough time to settle into their jobs. The employee needs time to learn his job and become competent.

Employees should enjoy job security because instability leads to inefficiency. Successful companies usually have a stable group of employees.

An employee gives the best if they feel secure in their job. It is the duty of management to provide job security to its employees.

13. The initiative

Without limits to authority and discipline, all levels of employees must be encouraged to show initiative. Management should encourage initiative.

That is, they must encourage employees to make their own plans and implement these plans. This is because the initiative satisfies the employees and brings success to the organisation.

It allows subordinates to think of a plan and do what is necessary to achieve it.

The management should support and encourage the employees to take initiatives in the organisation. This will help them increase their interest and make it worth it.

Business principles can continue well if the strategic leadership starts with taking the employee toward completing tasks and taking the first step.

14. Community spirit

Management should create unity, cooperation and team spirit among the employees.

They should avoid the politics of division and judgment. Harmony and cohesion between workers. It is a great asset in the organization. It is a quality in every successful business.

 These principles are guidelines for every managerial job. A manager must act in accordance with the fourteen principles of management; In order to reach the goal and create a surplus.

It is the management’s responsibility to motivate its employees and support each other regularly. Developing trust and mutual understanding will lead to a positive outcome and work environment.

These are the 14 Principles of Business Administration by Henri Fayol that are universally accepted. They act as a guideline for the managers to carry out their work in accordance with their responsibilities.

Finally, you need to make your employees feel important by rewarding high performers and giving them an opportunity to improve. If your employees know how important their work is to your team, they will feel valued, confident, and motivated to help you succeed.

The most frequently asked questions about the principles of business management

What is the organization?

An organization is called a specific group of people who contribute their efforts towards achieving the goals of an organisation. Organization is the process of establishing relationships among the members of an organization.

What is business administration?

Business administration is the discipline devoted to organizing, analyzing and planning different types of business operations. And if this sounds really general, it’s because these fields cover a lot of space!

These degree programs teach the essential skills required to run or manage a business efficiently. That’s why you’ll find business administration majors in every industry, in a variety of different job types.

So, whether you want to work for a large corporation, or at a mom-and-pop store, you can be confident that earning a business and management degree will teach you the skills and theory you need for a successful career.

What are the branches of business administration?

The potential job titles for business administration majors are practically unlimited. They range from financial managers, who use their computational skills to generate financial projections, to marketing directors, who rely on their creativity to manage advertising and sales efforts.

If you are interested in earning a degree in business and management, there are dozens of potential areas of study to choose from, including:

+ advertisement
+ Entrepreneurship
+ Hospitality management
+ Management of information systems
+ Global business
+ non-profit management
+ Operations management
+ General administration
+ Sales management
+ Supply Management

And if you’re looking for more non-majors in business and management principles, there are also general degrees that don’t require you to choose a major.