With theincreasing number of corporate scandals and organizational failures, the workof managers has been put into question. Are the managers of today competentenough to take on this job? Should there be more qualification required in thisdomain? In order to answer these question, one must first understand what arethe principles of management and what are the duties of a managers nowadays? Porterargues that, nowadays, an organization can be successful over a competitor inone of two ways: either it can sell a product or a service, identical to thecompetition, at a lower price, or it can sell a differentiated product or aservice for a higher price. This means that if an organization wants to thrive,it should adopt a cost advantage strategy or a differentiated strategy (Porter, 1980). Thus, a different set of managerial principles are required.Thepurpose of this first section is to present how Fayol’s past principles ofmanagement, can be applied to Porter’s present competitive strategies. Henri Fayol was the original founder of the modern managementmethods.
Therefore, to understand management and organization is to understandhis work. Henri Fayol’s 14 principles of management define the principles ofmanagement, and are used today by most organizations as guidelines formanagement related actions. Among these 14 principles, six can be defined asuniversal because they are essential to all types of businesses. However, theremaining eight do not fit both cost advantage and differentiated strategiessimultaneously. The first section will enumerate the six principles that can beapplied to both strategies, and the second section will identify the remainingprinciples and highlight their limits.The six principles essential to all business strategies are:Discipline, Subordination of the individual interest to general interest,Remuneration, Centralization and finally equity.Discipline is defined as reciprocal respect between a firm and itsemployees (Fayol, 1949, p.
22). It ensures a smooth running of a company withoutany surprises. The best way to achieve a disciplined environment in a firm,is to have intelligent and aware managers that can set the tone and makes sureeverything runs as expected.
This means a supervision of employees isnecessary. This leads us to the second principle: Subordination of theindividual interest to general interest. This is the idea that the firm’s goalscome before the individual’s interests (Fayol, 1949, p.26). The mainobjective of this principle, is to make sure that the decisions made by theemployees benefit the firm and not their personal interest.
This applies toall employees, including managers and executives. Speaking of executives,according to Fayol’s theory, the power of such a position can only beattributed to the highest rank of managers in an organization. As a result,Centralization of power must be adopted to ensure that the right decisions aremade (Fayol, 1949, p.
33). A successful organization needs motivated andproductive employees that give their best during work periods. Thus, makingsure that employees are fairly paid is vital to the success of a company.
Thistheory refers to the fifth principle, remuneration (Fayol, 1949, p.26). Thisconcept ensures that employees are not under or overpaid for their work. Inaddition to being paid fairly, they must also be treated kindly and equally.This idea refers to the last principle: equity (Fayol, 1949, p.
38).Allof these principles can be applied in any organization whether it’s following acost advantage strategy or a differentiated strategy. Now, moving onto theremaining principles which can only be adapted to a specific strategy. Theseare: Division of work, Authority, Unity of command, Unity of direction, Scalarchain, Order, Initiative, Esprit de corps.Division ofwork is the idea that an organization must divide labour into specializedtasks. By doing so, the organization would run more efficiently, since itavoids time that would be lost from shifts of tasks (Fayol, 1949, p.
20). Thisprinciple is particularly true in the case of a cost advantage strategy, wheremass production is used to achieve low cost (Porter, 1980). However, thisprinciple is not applicable to a differentiated firm. A differentiationstrategy is founded on the basis that the company provides a feature so uniquethat the customers are willing to buy a premium price.
This requires creativityand critical thinking. These two traits are very limited in a company relyingon an economy of scale to gain profit (Herzberg, 1966).Authority is expressed as the right give orders and demandobedience (Fayol, 1949, p.21). Two forms of authority can be deduced from thisdefinition. Formal authority and informal authority.
Formal authority refers toauthority related to a position or a rank, while informal authority is relatedto the intelligence, experience and leadership of an employee. According toFayol, in order to achieve high performance, the adoption of both formal andinformal authority is required, because it guarantees more efficient andproductive employees. However, this is not necessarily the case fordifferentiated organizations. As noted previously, a differentiated businessfocuses on providing unique features to the customers. A strict exercise ofthis principle would limit the creativity and productiveness of its employees(Porter, 1980). Thus, adopting strict authority is not recommended todifferentiated businesses because of its effect on creativity. Unity of commandand Unity of direction, similarly to authority, restrains the creativity of itsemployees.
The principle of unity of command is founded on the idea that an employeeshould be supervised by no more than one person (Fayol, 1924, p.24). A costadvantage company might argue that the adoption of this principle is beneficialbecause it eliminates confusion that would surge if various managers were incharge of the same employee. However, since a differentiation strategy requirescreative and reflective thinking, this principle is not applicable.
Creativityis only fortified when employees share their ideas with different staff members(Porter, 1985).The principle of unity of direction, on the other hand, statesthat each task must have its own specialized goal. In the case of a costadvantage organization, this principle minimizes conflicts between employees,thus increasing their efficiency (Fayol, 1949, p.25). However, once again, thisdecreases an organization’s creative ability (Pelled et al.
, 1999). The lastprinciple that can bring negative outcome to differentiated strategies is thescalar chain. The scalar chain principle states that there should be an uninterruptedline of authority from the lowest to the highest level (Fayol, 1949, p.34). Inthe case of a cost differentiated strategy, this hierarchical form oforganization control increases efficiency. Conversely, the use of a scalarchain in a differentiated firm can restrain communication and creativethinking, which would lead to a slower adaptation to outside changes (Parker,1995).Now that we have revealed the principles in favour of costadvantage strategy, let’s move on to principles that favorise differentiatedstrategies.Stability of tenure of personnel is a very crucial principle foran organization that is based on a differentiation strategy.
This principleencourages managers to provide new recruits time to get used to their newtasks. In addition, it encourages failure and risk-taking (Fayol, 1949, p.39).However, the principle of stability seems useless to a cost advantage firm,since the implementation of this principle will bring some additional feeswhich a cost advantage company cannot afford.
As stated previously, a differentiated firm encourages itsemployees to take risks and think outside the box. This is referred to theinitiative principle (Fayol, 1949, p.39). This principle aims to give a firm’semployees more freedom in their work. However, in the case of cost advantagestrategy, this principle will only decrease efficiency since it providesemployees with a less specialized task.Finally, the last principle of management is esprit de corps. Thisprinciple encourages the involvement and unification of its employees, in orderto create better relationships among the workers (Peters & Waterman, 1982).
This principle can also be considered as a waste of time and resources for costadvantage companies that emphasizes on its employees focus on one task alone(Taylor, 1947).All in all, we notice that the organizations of today adoptdifferent principles of management according to their business strategy. As well as defining the principles of management, Fayol has alsodescribed the duties of a manager. He labelled them, planning, organizing,command, coordination and control. Together, they represent the managementprocess.Fayol argued in this theory, that planning was an importantfunction of a manager’s job.
An efficient plan had to predict the expectedresults by taking into account a firm’s resources, its present situation andfuture possible trends. In addition, it should try to identify currentweaknesses to ensure future development (Fayol, 1949, p.49). This is what werefer to today as a strategic audit. Organizing is the second element of the management process. Fayoldefines organizing as providing the necessary resources in order to achieve itsobjectives. This managerial function can be divided into two categories:Material organization and human resource management. Human resource managementplays a vital role in the success of an organization (Fayol, 1949, p.
52).Workers are not only motivated by money. Many personal and social factorscontribute to the motivation of an individual.
What many managers misunderstandis this tension between workers’ logic of sentiments and managers logic of costand efficiency, which often results in organizational conflicts. The Hawthornestudies highlight this aspect. Indeed, in these studies, the adoption of betterworking conditions resulted in more efficient employees. This clearly revealsthe importance of human resource management.Command, Coordination and Control are the final elements of themanagement process.
Fayol believed that in order to get the most out of hisemployees, in addition to human resource management, a set of actions must betaken. Firstly, a manager must have a good relationship with his employees(Frederic Blancpain, 1974, p.24). Secondly, a manager must be able to coordinateall the activities to facilitate the planning process (Fayol, 1949, p.103).
Finally, a manager must make sure everything is going as expected (Fayol, 1949,p.107). In the presence of errors, a quick correction is required to avoid bigrepercussions. It is clear that the studies of organization is very deep subject.Many of the managers of today know very little about organization andscientific management when appointed with a managerial task. In order toabolish this saga of poor management decision, scientific management has tobecome a profession in itself where studies are mandatory as well as experiencein the domain.