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In this second part of the 14 Principles series, we’ll discuss the next five for systems of rules and conditions for the workplace.

The early 1900s saw the boom of large industrial businesses that had little management tools, models, and methods available for the rising era of entrepreneurs. It was during this time that scientists began to observe and formulate the perfect solution for modern business management. Here are Henri Fayol’s principles of management numbers seven to eleven on how to create proper systems of management in the workplace.

Principle of Remuneration

In this principle, Fayol is simply saying: pay your employees fairly.

This is because he has observed that employees who are reasonably compensated find higher satisfaction in their work. They feel grateful, relevant, appreciated, and dedicated to the job that they do. When they have enough to feel secure and stable, it reduces additional stressors that could get in the way of their work.

On the other hand, dissatisfaction in compensation, at times, demotivates employees. Who could work well for a boss who cheats employees of their fair wages?

Managers who cut costs on employee welfare risk losing their business. This is because employees are primarily at the forefront of any business operation. Machines are only as good as what gets fed into them. Who feeds the information to them? The people of course! However, don’t fret if your business can’t compete with industry wages. There are also non-monetary methods of remuneration that Fayol proposed by way of compliments, benefits, bonuses, training, and recognition to reward the efforts that have been made.

Principle of Centralization and Decentralization

Centralization refers to the concentration of authority or power in the top-level management. Decentralization is the even distribution of power at every management level.


Centralization Decentralization
Power of authority when it comes to planning and making decisions fall on to the top management only Authority, responsibility, and accountability is distributed to different levels of management
The process of decision making is comparably slow because only top management gets to decide The process is comparatively faster because the weight of the responsibility is distributed
Favors proper coordination and leadership Accountability of the success gets shared as well as the faults in tasks
Bigger organizations tend to have inadequate control of the people Since authority is distributed, control over the organization is more achievable
Works well for a small-sized organization Works better with large corporations

However, Henri Fayol pushes for a case-to-case basis type of balance act between the two. For him, a company cannot be completely centralized or decentralized but a combination of both.

The degree of centralization or decentralization depends on the organization’s nature and size. In fact, he recommends that each department should determine their own levels of centralization also, as each function differs in nature and may benefit from varying levels of centralization.

For example, business strategic plans are still better when under strict top-level control while operational work is best decentralized for faster, better-informed decision-making.

Furthermore, small organizations manage better with higher centralization but as it grows bigger, it should lean towards decentralization to keep everyone in the loop and alleviate the added workload from top managers. However, it may also depend on the employees. Skilled and competent employees would benefit businesses with decentralized management, but less developed employees may still need a centralized control.

Principle of Scalar Chain

Scalar chain refers to the line of authority from the top-level down. To Fayol, this line must be followed strictly. Every information (such as commands, requests, instructions, and messages) must go through all the levels; no skipping over even just one person. This principle is important in closing chances of communication gaps within the organization and in creating a systematic flow of information. Let’s try to understand it with this example.

Say, you have 10 employees wherein employee 2 has to communicate a command to employee 9. Following the Scalar Chain Principle, employee 2 has to, first, pass the information to employee 3; employee 3 passes it on to employee 4, and so forth.

The rule has one exception, which is what Fayol calls ‘The Gang Plank.’


The Gang Plank allows same-level managers communicate directly with each other in cases of emergency or urgency. However, this is only for same-level managers. If the principle is too rigid, businesses could add more exceptions to make their communication networks more flexible. Modern businesses have deviated somewhat from this principle.

This is not to say it is obsolete. The idea is to keep everyone informed of what is happening in the company and keep everyone accountable for what they communicate.

Principle of Order

Pay attention to the workplace aesthetic. This principle is concerned with the physical work environment, not ‘order’ as a command. Much like organizing files, Henri Fayol puts importance on creating a work setting that is easily navigable and places everyone and every equipment within reach. This is through placing order in the arrangements of people and equipment.

The placement of things is called material order, and the placement of people is named social order. There should be a systematic arrangement of these workplace elements for people to easily find everyone and everything they need for work. Material order specifies that every work item should be safe, appropriate, and stored and that every office space has a specific purpose for use. Social order is concerned with recruiting suitable candidates for the job and assigning a specific area for each worker and entire departments to be easily found and communicated to.  

Principle of Equity

To expect work devotion is to earn it. An employer must first treat their workers with kindness and justice. This is the principle of equity. It calls for managers to be kind and impartial. The workplace should have no space for discrimination or favoritism. This principle is essential in maintaining team harmony and discipline.

Fallsview Casino Resort’s commercial showed an extreme case of favoritism but you get the point. However, treating everyone equally also calls for fair sanctions. Fayol points out that “at times force and harshness might become necessary for the sake of equity”. To uphold the principle of discipline, one cannot set aside offenses. Everyone is subjected to the rules, regardless of position and status. Equity cannot be achieved with one manager overlooking his employee’s offenses while another manager under the same organization strictly follows the disciplinary actions for his employees. This causes reasons for division between departments.

Outsourcing could help you apply these principles.

It is challenging for businesses with modest capitals and a handful of staff to apply these principles of management. Consider consulting with Anderson Group BPO, Inc. a business process service provider specializing in Contact Center Solutions, Back Office Solutions and Seat Leasing. We offer business solutions that could answer these principles of management.

For fair wages, outsourcing staff with lower standards of living could stretch your budget farther.  The services we offer also lean toward the decentralized type of dynamic requirement, such as customer support through inbound calls, outbound calls, email, chat, and social media management; and back-office operations like data entry, data cleansing, data analysis, and market research. As a BPO, we have streamlined our processes to follow the scalar chain wherein the client is head and we adapt to your needs. Offshoring staff also frees up business owners the burden of providing the order of space and facilities an in-house staff will need. Ultimately, as a business connecting businesses to staff, the human-centric nature of the industry leverages on equity to promote work relationships while balancing hr discipline.

Reach out to us and find out more about our services.