Management Principles and Business Organisation
Core concepts
Management is the process of planning, organising, staffing, directing and controlling resources to achieve goals. Learn each function and its output. Fayol's fourteen principles (division of work, authority and responsibility, unity of command, unity of direction, scalar chain, equity, order, discipline, remuneration, centralisation, initiative, esprit de corps, stability of tenure, subordination of individual interest) and Taylor's scientific management (time and motion study, standardisation, differential piece rates, functional foremanship) are frequently tested. Know the difference: Fayol is administrative and top-down; Taylor is shop-floor and efficiency-driven.
For business organisation, understand the forms: sole proprietorship, partnership, joint stock company, cooperative and public enterprise. Compare them on liability, control, continuity, capital-raising capacity and legal status. Understand organisation structures: line, line-and-staff, functional, divisional, matrix and network, plus concepts of span of control, centralisation versus decentralisation, delegation and authority relationships.
Traps in questions
- Unity of command (one boss per employee) versus unity of direction (one head, one plan per objective).
- Assuming a company's shareholders manage the business; they own it, directors manage it.
- Treating delegation as abdication; accountability cannot be delegated.
- Confusing a partnership's unlimited liability with a company's limited liability.
Rule of thumb
Match structure to strategy and size: simple firms use line structures, diversified firms use divisional, project-driven firms use matrix.
Worked example
A firm's two managers give conflicting orders to one clerk. The violated principle is unity of command. If instead two departments pursue the same goal under separate plans, the violated principle is unity of direction.