Class 12 Business Administration Notes · GSEB
Henry Fayol — Administrative Principles
Henry Fayol — Administrative Principles: study the six activities of an industrial unit, all fourteen principles and Drucker's Management by Objective. GSEB Class 12 Commerce notes with a six-tile activity map and rule cards for every principle.
Last updated: 23 Oct 2026
Notes
Fayol and the Six Activities
Notes — the key lines
- Henry Fayol — French engineer and industrialist — published "Industrial and General Management" (1916).
- He split an industrial unit's activities into six parts: technical · commercial · financial · safety · accounting · management.
- Management activities are the five functions: planning, organisation, direction, co-ordination, control.
Henry Fayol divided administrative principles of an industrial unit in six parts for ease and clarification:
The principles developed by Henry Fayol were totally new. He believed that to become a successful manager in any industrial unit, only knowledge is not essential, but it requires to be aware with the suitable functioning method of the respective industrial unit's format.
Trap — The six parts are activities of the unit, not six principles — the fourteen principles come next.
The Fourteen Principles of Management
Notes — the key lines
- Fourteen principles, from division of work to esprit de corps.
- The exam-heavy four: unity of command (one boss per employee) · unity of direction (one head, one plan) · remuneration · stability of tenure.
- Fayol calls them directive, not final — managers may add principles.
Henry Fayol, based on his experience and knowledge, presented fourteen important principles of management, which have proved very useful in management.
Presenting the said principles, Henry Fayol says that "These are only directive principles. Success of these principles depends upon the sharp sense of management. It is a task of wisdom."
Division of work — In management, more weightage is given on higher efficiency of employees and managers. Productivity can be increased by optimum use of production equipments. Moreover division of work is necessary to increase efficiency of employees and managers. Specialization is also possible through division of work. Division of work should be done at managerial and factory level to take benefits of principle of specialization.
Authority and responsibility — Power and responsibility are two sides of a coin. Power without responsibility and responsibility without power are incomplete. When a person is assigned a responsibility for some job, at the same time power assignment is essential. While assigning the power, different parameters like post of employees, knowledge, qualification, experience, art of leadership, maturity, etc. should be considered; as a result enthusiasm of employees rises and aim achievement becomes easy.
Discipline— Optimum use of equipments and consistency of activities are very much necessary for industrial discipline. Discipline creates certain kind of harmonious environment. Industrial discipline is established by certain kind of rules and code of conduct and as a result, governance takes place in unit. When employees are more, then control becomes easy through discipline and code of conduct. Employee's interest in job increases. Managers even can take work easily. Supervision, clear and appropriate contracts between workers and owners and appropriate implementation of punishments at every level are important for discipline.
Unity of command — Employees cannot follow orders from more than one superior, hence this principle shows that an employee should get order from only one superior for any job or activity. It means that an employee should be responsible to only one superior for a particular job or department. Due to this principle, confusion never arises amongst employees in regards to order. If more than one order is given, that creates confusion amongst employees and industrial discipline cannot be maintained due to that.
Unity of direction— Planning is an outline for future. This can be done through job division and specialization. If deviations are found during planning, then direction-guidance is provided. These directions should be given by superior authority. By doing this, co-ordination of all task and efforts can be done easily. According to this principle there should be only one superior employees' group and this group should be doing job for only one purpose.
Subordination of individual interest to the general interest — Management is a collective activity. Hence there should be co-ordination between persons and departments. This results in an easy achievement of goals of business unit. This principle shows that interest of individual or employee group should be considered as subsidiary against the interest of whole unit. This means that common interest should be prominent instead of individual interest.
Remuneration of personnel — Remuneration means return against the services provided by employees. According to this principle, remuneration to employees of company should be suitable; ideal payment of wages makes stronger relationship between owner and employees. All employees do not work with the same efficiency in a unit. There are some efficient employees who are giving more production and doing more work. They should be compensated against their efficiency. By doing this, worker turnover rate decreases. Promotional schemes like bonus, profit sharing, representation in managerial committee should be implemented for skilled workers.
Centralization— There must be clarity that to which extent centralization or decentralization should be done to make successful management infrastructure. If powers are not delegated it is centralization. To make best use of employees' strength, principle of centralization should be adopted. Centralization has low success ratio in giant size units, hence centralization and decentralization is done as per the size of unit.
Scalar chain — This principle emphasizes creating a chain from top level management to bottom level employees. Chain of power from higher administrative officers to bottom level employees should not be broken. Powers and responsibility should be vested as per their respective level. Employees working in a unit should be aware of who is responsible to whom. As a result a scalar chain occurs, which moves from top to bottom and from bottom to top.
Order — This principle emphasizes two parameters: raw material arrangement and social arrangement. Each part of raw material should be at its appropriate place. Likewise, skilled employee should also be placed at right place. Arrangement should be done for recruitment of suitable employee in suitable place.
Equality — Employees are a part of managerial system. Since the employees are human beings, practical approach should be adopted to handle them. Superior should behave appropriately and uniformly while taking work from them. Efforts should be made to establish equality in unit by informal way instead of legal or traditional way. Behavior of employees is based on faithfulness, attitude, uniformity and justice.
Stability of personnel tenure — Permanent and stable employees are asset of any business unit. An employee can develop himself by remaining in one unit and contributing in the achievement of goals of the business unit. As the employee remains for long time in any unit, his knowledge of system results into more productivity and also decreases labor turnover rate. There should be an arrangement for promotion, training, etc. for permanent employees.
Initiative — As quality of entrepreneurship is necessary for industrialists, in the same way there should be quality of initiation in employees. Industrialists should provide such atmosphere that initiation may be encouraged. Due to initiation, strength of independent working in an employee develops and it increases their leadership quality.
Esprit de corps (feeling of oneness) — Success of an industrial unit lies in mutual relations of managers and employees; hence there should be harmony in both classes. Managers should generate group feeling among employees. If all employees will work together then achievement of goals becomes easy.
Henry Fayol said that "above list is not last list of management principles. Managers can add new principles based on their experience, research and knowledge. These principles can be implemented in all kind of activities like business, economic, political and social."
Fayol's list is directive, not final; managers may add principles from their own experience.
Division of work produces specialization; unity of command prevents confusion; unity of direction aligns one group to one purpose; remuneration and stability reduce labour turnover.
Trap — Unity of command is not unity of direction — one superior per employee versus one head and one plan for a group of activities.
Drucker's Contribution
Notes — the key lines
- Peter F. Drucker (1909–2005) — writer, philosopher, educator — is called the Father of Modern Management.
- His core contributions: Management by Objective (MBO) and the principles of self-regulation.
- He stressed the human asset and contributed to HRM, marketing and stress management.
Peter F. Drucker (1909–2005) as a well-known managerial leader was also a famous writer, philosopher and educator. There was a change in global business arrangement due to globalization. Need of development of new methods of management was arisen. Peter F. Drucker favored for more importance to human asset in business unit.
About Management by Objective he says that there should be uniformity in aim of employees and managers for achievement of aim. Management by Objective is too much effective for different business formatted units.
Key Takeaways
- Management by Objective is too much effective for different business formatted units.
- Hence, Peter F. Drucker is called Father of Modern Management.
Trap — MBO aligns employee aims with manager aims — it is not a pay scheme, which is Taylor's terrain.
60-Second Recap
Key Takeaways
- Technical · commercial · financial · safety · accounting · management.
- Work · authority · discipline · command · direction · interest · pay · centralisation · chain · order · equity · tenure · initiative · unity.
- Modern manager → MBO → self-regulation → human asset.
Exam Questions
Exam Questions
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