Henri Fayol, ca. 1900

Managers in the early 1900s had very few resources at their disposal to study or systematize their management practices. Henri Fayol, who was a French mining engineer and author, saw the need for this kind of study and, using the mines as the basis for his studies, developed what is now regarded as the foundation of modern management theory. In 1914 he published Administration industrielle et générale, which included his now-famous “fourteen principles of management.” Fayol’s practical list of principles guided early twentieth-century managers to efficiently organize and interact with employees.

Fayol recognized that management is fundamentally a process involving people. He saw that work could be managed more efficiently and smoothly by supporting the workers doing the tasks. He proposed that if managers could instill a sense of team spirit (esprit de corps) and encourage employees to contribute their own ideas, the problem of high turnover and instability in the workforce might be solved. At the time, working conditions in much of the industrialized world were terrible, and many of Fayol’s principles ran counter to conventional ways of thinking about and treating workers. For instance, Fayol said that it’s essential to pay a fair wage for a fair day’s labor, and he claimed that productivity would actually increase if managers treated workers fairly and kindly. These were radical ideas at the time. Fayol argued that that discipline, while important to organizational success, ought to come from effective leadership—not from dictatorial or harsh management practices. Fayol recognized that a company’s people, not its structure, determine success or failure.

Fayol also addressed the role of structure in building an efficient organization. Several of his management principles deal with the framework in which managers operate, touching on aspects of what we would today call “organizational structure.” He encouraged companies to arrange men, machines, and materials systematically in order to maximize efficiency. In short, he applied the adage “a place for everything and everything in its place” to the operations of a business. He believed that managers ought to communicate to employees about their roles and responsibilities in a clear and compelling manner, thereby reducing uncertainty and waste. He also brought to the business environment a concept that had been used in military strategy for centuries: the chain of command. Fayol’s “scalar chain” was, in effect, an organization chart of the type seen today (and below), showing the lines of communication and chain of command from the top of a company to the bottom. He believed that by means of such hierarchies, firms could achieve unity of direction and command.

Organization Chart of a Large Stove-Manufacturing Company, 1914.

The notion of unity of direction and command meant that “for any action whatsoever an employee should receive orders from one superior only,” a concept Fayol adapted from the biblical teaching that “no man can serve two masters.” He proposed that organizational activities having the same objective should be directed by a single manager using a unified plan to attain a single common goal. At the same time, that single manager oversees one group of workers all working together to reach the goal. By adhering to these principles of unity, organizations can avoid duplicating efforts and realize efficiencies instead.

These efficiencies were not possible without what Fayol established as his first and perhaps most profound principle—the division of labor or division of work. Fayol recommended that jobs be broken down to the individual tasks that comprise the whole and workers be assigned to those individual tasks or series of tasks. He believed that when someone performs the same task over and over, he acquires speed and accuracy. Fayol observed: “The worker always on the same post, the manager always concerned with the same matters, acquires an ability, sureness, and accuracy which increases their output.”^[1]

Fayol also made an enormous contribution to management theory through his scientific study of the work of management. He made a clear distinction between operational activities—manufacturing, sales, etc.—and managerial activities, which he viewed as being fundamentally concerned with human interaction. From there, he systematically examined the different aspects of the management process and spelled out the functions that managers perform.

In the following excerpt from General and Industrial Management, Fayol identifies five functions of management:

To manage is to forecast and plan, to organize, to command, to coordinate, and to control. To foresee and provide means examining the future and drawing up the plan of action. To organize means building up the dual structure, material and human, of the undertaking. To command means maintaining activity among the personnel. To coordinate means binding together, unifying, and harmonizing all activity and effort. To control means seeing that everything occurs in conformity with established rule and expressed command. [Emphasis added.]^[2]

Over the years, management theorists have built upon and refined Fayol’s original work and, more recently, have combined the “command” and “coordinate” functions into one function: leading. Today, the key functions of management are considered to be the following: planning, organizing, leading, and controlling. All levels of management perform these functions; however, as with the skills required for effective management, the amount of time a manager spends on each function depends on the level of management and the needs of the organization. In the next readings we will explore each of these functions in greater depth.