The 14 Must-Know Principles of Business Management

Henri Fayol’s principles of business management are a must-know to achieve great team leadership and business management. Henri Fayol (1841-1925) spent most of his life working as a manager for a French mining company. But before you rush into thinking about dirty hands and blackened faces, Fayol’s work was far more with pen and words than axes and ‘sac à dos.’

Fayol was a mastermind who spent his career observing and testing management techniques. And he published his findings in a book entitled General and Industrial Management 1916. This was an updated version for the 1987’s version, both of which became the legs modern business management stands on today. So, let’s find out more about these principles of business management.

 

The 14 Principles of Business Management Are

1. Division of Work
2. Authority and Responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of Individual Interest
7. Remuneration
8. Degree of Centralization
9. Scalar Chain
10. Material and Social Order
11. Equity
12. Stability of Tenure
13. Initiative
14. Esprit de Corp

1 - Division of Labor

Every team member has a different profile and set of preferences. Even employees with the same university degree and work experience can differ in terms of their favorite tasks and what they’re best at.

One of the primary functions of business management is assigning the right task to the right employee. That’s to say, it is your job as a leader or a manager to identify your team members’ best skills and what they enjoy, then assign them suitable tasks.

This reduces the possibility of conflicts or one member interfering with another's task to 0 times per operation. Moreover, proper division of labor makes the same skilled worker perform the same skilled task over and over again. As a result, the worker (and the whole workforce) master the task at hand and it becomes a walk in the park. Consequently, the very professional team will deliver work faster and increase the pace of production and deployment.

Repetition makes perfect! And Vardot understands and respects this rule to the edge of the edge. That’s why, for instance, this article and almost all the former ones go through the same process of production! We have SEO experts who work closely with the content writers to identify new good topics to write about which should be of value to our audience. Then after writing the blog, it’s submitted to be reviewed by a manager who assures the quality of content and suggests edits.

Then the designing team works closely with the content writers to come up with illustrating visuals and suitable images to be used. And the final product is submitted to the publishing team last, where they make sure the article is published in its best form for our audience.

This system is a holy philosophy at Vardot. And we respect it even when working with our clients on their projects. Each of our team members, be they artists or engineers is specialized in specific tasks that they perform repeatedly to the level of mastery. This ensures our clients get the best services as fast as possible.

2 - Authority and Responsibility

Famous comics writer Stan Lee is known for saying “With great power comes great responsibility.” And Fayol couldn’t agree more! That’s why the latter’s second business management principle calls for carrying the responsibility of being in charge; being a leader and a manager.

As you are at the top of the hierarchy, you usually are in charge of calling the shots and defining the line of action. In this case, you’re not only responsible for the quality of the process, but also the quality of the outcome!

In other words, whether the plan works or not, you should take on the responsibility rather than blame a team member. Even when a worker is negligent and s/he slows or even disrupts the process, it’s still your responsibility that the process is disrupted or slowed! That’s because the first business management principle clearly states that you assign tasks! Therefore you take responsibility even for the performance of your team.

The point we are trying to make here is: to make sure to pick the right team members and assign the tasks conveniently; thus take responsibility for the outcome! Be it a good outcome or a bad one. This will make you grow in the eyes of your employees. And they will respect you more, and therefore do their best not to disappoint you the next time!

On the other hand, blaming and punishing employees will only result in creating negative and foggy energy in the working environment. Avoid doing that and give second chances mixed with extra tips and guidance to reduce the frequency of the same issue again. That’s what a successful mentor would do, and that’s how business management is practiced.

3 - Discipline

Any company that lacks a clear disciplinary system will eventually collapse. This doesn’t mean you should recite the rules every morning on your team, or have a big board at every corner as ‘The Big Brother’ would. Still, it’s very recommended that a clear statement is accessible and it can be included in a welcoming email to employees once they’re hired.

The disciplinary lines should include terms of respect for one another and what the leader expects from his team VS what the team members should expect from their leader. But it shouldn’t stop at this point! Your crew should see your discipline in every action you take from day one. If they see that you’re devoted to working and treating everyone with respect and appreciation, they’d simply do the same!

Principles of business management aim to maintain order. And the third principle is about respect and appreciation. In a nutshell, your team is a reflection of who you are. Discipline yourself and treat everyone as you want to be treated. Then the next thing you’d know is that you’re leading a team of disciplined professionals who do their work and respect each other. Productivity and teamwork will only peak upward after that!

4 - Unity of Command

A lot of times, startups and small businesses are launched by more than one person. Even Apple was launched by three people! But guess what! The conflict resulted in the dissolving the founding triangle and Steve Jobs became the CEO by himself.

And this is exactly what the fourth principle of management aims to push away.

A team should be managed and overseen by one manager. Any problem in decision-making should be solved by the executive board before the final command is spoken to the team. This ensures requirements clarity and makes the next principle of business management go smoothly.

5 - Unity of Direction

It is a wrong belief that two teams having different responsibilities and goals should work separately. It was believed that, for instance, the SEO team should work separately from the writing team, and the same goes for the sales enablement team. But the unity of direction isn’t about separating teams. It’s much more about unifying the efforts of each sub-team.

For instance, writers should have a clear work plan that they follow. And the plan can include interacting with the sales enablement team to write good copies about services and products and increase lead generation. And the plan can also include working closely with the SEO team to make the copies as optimal as possible.

As long as each team has a clear direction and mission in mind, interactions shouldn’t be a problem! Another perfect example is the DevOps management model. DevOps stands for Developers and Operators; both are two different teams with two different objectives. One writes code, the second makes sure projects end in time. The DevOps model integrates both teams to accelerate production and reduce the frequency of delay.

In other words, as a manager, it’s your job to create operational plans for your team that will enable necessary interactions and make them smoother. As long as each team understands its mission and knows what to focus on, the rest should be left to discipline and interchangeable respect.

6 - Subordination of Individual Interest

Selfishness is a human trait. It’s extremely rare to find an altruist person who’d prioritize someone else’s good over his or hers. But your team should understand that tasks aren’t about themselves! It’s about the whole team and the progress of the company.

As the team has a clear line of command, individual interests should be left out of the equation. Any selfish or individualistic behavior should be addressed directly and reprimanded respectfully.

A team that prioritizes the common good and the company’s goals over personal ones is far more likely to strive and thrive. But isn’t it a human trait to be selfish and relatively speaking self-centered? Yes, it is! And as a manager, you can feed this human need by praising the performance and achievements of your teams and giving them all the credit for whatever they do right! Even if it's your idea and your plan, giving the credits back to the team makes you grow in their eyes and reduces the urge to be selfish.

7 - Remuneration

As an extension of the former set of principles of business management, remuneration comes to end with the problem of selfishness!

Materialistic rewards should be a ritual at your company. This encourages your team’s sense of recognition and increases the hustle and competition in a friendly way. You can do that by amplifying individual achievements and tipping the employees fairly for their prime performances. But it also means there should be an official treat for instance for the top three employees of a company each month.

Three can be a big number if your team is only four people, and it can be very small if you have a giant corporation with hundreds of employees! It’s, again, your job as a manager to figure out an effective way to remunerate shining stars in your company. 

8 - Degree of Centralization

Centralization is more of a political theory principle rather than a business management one. In a nutshell, a centralized company is one where the management power is centered at the top. That is to say, managers and the executive board possess all the decision-making accountability, and anyone below them is a doer. On the other hand, a decentralized company unleashes its employee’s freedom to act freely and take control over project management.

As the latter seems more like democracy, it may not be a platonic approach! The ideal approach, as we are doing in Vardot, is to seek moderation. Following Fayol’s principles of business management will help you (as a manager) regulate the pendulum in a perfectly balanced spot between decentralization and centralization.

To do so, we recommend you don’t teach your team to rely on your micromanagement all the time. Don’t walk them from point A to point B every day. Show the way, and let them stumble and crawl to make it right! They should be able to make basic decisions by themselves and make your life easier. At the end of the day, it’s what they’re paid to do, isn’t it? But still, they should know that it’s not the green light to act as managers and take control of everything without your permission. Big decisions should still be centralized; you choose the way, but they walk the mile!

9 - Scalar Chain

One of the primary functions of management is to organize the authority hierarchy of a company. That’s to say, each employee, including managers and executives, should be aware of their position in the company, and act upon it. Especially when communicating and interacting in official meetings.

Fayol explains that maintaining clear hierarchical borders between the company’s entities requires making communication only open for one level up or one level down. But in this case, Fayol continues to explain, meaning would be lost on its way to the upper boards. And vice-versa, instructions as well get foggy and become confusing before they finally make their way to the low-class employees.

Modern means of communication, fortunately, made it possible to communicate between all classes without affecting the prestige of a CEO or offending a new employee. Even trillion-dollar companies’ CEOs now speak to the world via these technologies! Let alone in their companies.

You and your company should also take advantage of modern technologies to the fullest! Use Slack for instance to make communication between different parties easier, faster, and more effective. And rely on Gmail to distribute new assignments and files, YouTube to make tutorials, and so on.

In other words, this is a pre-solved principle of the principles of business management. There’s no way a good manager like you would struggle with the scalar chain.

10 - Material and Social Order

We’ve been talking a lot about the humanistic principles of management, but little to no attention was given to the means of production! But again, means of production start with the human force itself! Material and social order is about building the right team and putting the right equipment at their disposal.

A manager’s first assignment is not to build the right team! It’s rather about constructing the right working environment. This includes necessary and modern production tools and facilities. You can’t expect Einstein to observe the stars without an astronomical telescope! And accordingly, you can’t expect anyone to perform their tasks in the absence of basic requirements.

Once the environment is ready, it’s high time you choose the right team members. You should analyze their right skill set and type of personality to choose the ones who will function well and make the best result in the offered environment. Modern work and employment expert Simon Sinek recommends focusing on character far more than on skills. That’s because skills can be developed and improved quickly, but a bad person may never change in a lifetime! And you don’t want to be stuck with such a person (nor does your team).

11 - Equity

In a good company, employees should be treated equally regardless of race, gender, or religion. This includes money compensation as well as communication. If a team member feels s/he is being treated less nicely than other members or a member, not only will the person be jealous, but may also end up focusing and magnifying the issue rather than focusing on work. This may not be apparent in a one-day’s result but would certainly affect the long term.

Equity in the work environment requires being a sharp communicator who can read micro-communication changes such as tone, facial expressions, and even people’s energy.

12 - Stability of Tenure

Hiring a new employee then firing him/her for low performance and replacing him/her will result in taking a long time before finding the proper force. Let alone the irreplaceable effort and time that you can do nothing but watch pass by.

It’s a bad strategy to prioritize replacing hires over putting faith in them. If you choose the right candidate, give him/her enough time to adapt to the new working environment and work system before expecting fast turnarounds.

When employees feel like they may get fired if they go awry, guess what? They are more likely to go awry. And vice-versa, when given faith and time, they’re expected to take on the responsibility and initiative to learn faster and overdeliver.

Accordingly, make your new employee feel good about their new position rather than stressed and overwhelmed. The outcome will most of the time be better than a storm of fire-then-hire. 

13 - Initiative

Gone are the days when repression was thought of as good management. Modern principles of business management pour generously into the cup of friendliness and connectivity. Your team should feel encouraged to speak and suggest plan improvements and ideas.

Not only that, but they should feel welcomed and encouraged to speak. Even when a suggestion isn’t a very convenient one, the effort should still be praised and you can explain why the idea wasn’t good enough. That way, the teams will learn more about the company’s philosophy and will suggest better ideas in the future.

Fayol noticed that when working on ideas suggested by the team itself, they’re far more likely to perform better and make fast turnarounds. Employees also feel like they’re making an impact and having their legacy in the company. That’s why we highly recommend you listen and connect with your team, but cautiously to avoid breaking the boundaries we spoke about in the scalar chain principle.

14 - Esprit de Corps

The last business management principle is certainly not the least important. One reason could be the word ‘Esprit’ which is French for ‘Soul.’ That’s to say, we are talking about the soul of the whole company here!

Fayol loves and invites everyone to think of a company as a living body. He perceives it as an organism that has a soul and a personality. And one of the primary missions of a manager is to keep that body active and spiritually happy.

While there could be a zillion ways to do it, we recommend you always explain the why behind any mission. Make the employees know the worth and importance of their tasks. The sense of responsibility will keep them hustling even when the mission becomes daunting and tiring. Jokes and a sense of humor should also be a lifestyle in your company. Simon Sinek spoke excessively about this matter in his stand-up entitled Trusting Teams.

 

Conclusion

It’s been a long journey to go through these 14 principles, wasn’t it? But we believe it’s a journey that every manager should go through at least once in a lifetime! This will help you not only manage your team, but also plan, organize, control, coordinate, and certainly make better decisions for you and your team. Feel free to do more than read this article. And remember, management is not an idea, it’s a skill! So, whatever you think you picked today, it must be put into practice tomorrow.