Course Title: Principles of Management
Final Term Paper
Final Term Paper
Applications of HenriFayol‟s Fourteen Principles within
One Bank Limited
Humayra Fakir, 10121039
Topic of the Term Paper:
Application of HenriFayol‟s Fourteen Principles within
One Bank Limited
BRAC Business School
Date of Submission: 15th August 2013
We would at first like to thank our course faculty,AfsanaAkhtar for giving us the opportunity to
work on report that will increase our knowledge on the managerial activities of any organization
that we would select. We have selected One Bank Limited for preparing our final report. We got
all the information that we searched for from Mr. Shafiuzzaman, Executive vice President and
Manager of OBL. Without his co-operation may be it wouldn‟t be possible for us to complete
TABLE OF CONTENTS
NUMBER OF PAGES
Table of contents
(origin of the report, objectives,methodology,scope,
Description of Fayol‟s principles relating OBL
Division of labor
Unity of Command
Unity of Decision
Subordination of individual interests to the general
Esprit de Corps
Signature by submitters
Henri Fayol (Istanbul, 29 July 1841 – Paris, 19 November 1925) was a French mining engineer
and director of mines who developed a general theory of business administration. He and his
colleagues developed this theory independently of scientific management but roughly
contemporaneously. He was one of the most influential contributors to modern concepts of
management.Fayol's work was one of the first comprehensive statements of a general theory of
management. He proposed that there 14 principles of management. These 14 principles are
discussed below and their applications in a commercial bank named ONE Bank Limited.
One Bank Limited was incorporated in May, 1999 With the Registrar of Joint Stock Companies
under the Companies Act 1994, as a commercial bank in the private sector of Bangladesh.
The Bank is pledge-bound to serve the customers and the community with utmost dedication.
The prime focus is on efficiency, transparency, precision and motivation with the spirit and
conviction to excel as ONE Bank in both value and image.
The name 'ONE Bank' is derived from the insight and long nourished feelings of the promoters
to reach out to the people of all walks of life and progress together towards prosperity in a spirit
Origin of the report:
This report has been prepared to make a study on the“Application of Henri Fayol‟s Fourteen
Principles in One Bank Limited”, as a part of the fulfillment of the course MGT211, Principles
of Management, required for the Department of Business Administration of BRAC University.
The report was prepared under the supervision of Ms. AfsanaAkhtar, Assistant Professor of
BRAC University. We are thankful to her for assigning us inthis project.
Objectives of the report:
The main aim preparing this report was to know the application of Henry Fayol‟s fourteen
principles in the managerial structure of One Bank Limited. We also tried to prepare a written
statement of the managerial structure of OBL.
While working for this report we came to know about many things that go for and against the
application of Fayol‟s principle of management in One Bank Limited.
Primary Data Collection:
As we wanted to know about the managerial structure and function of One Bank so we
interviewed on their managers. We interviewed (plz write the name n his designation). We tried
to ask précised questions to our interviewed person so that he could answer them properly and so
that we could get what we were looking for.
Secondary Data Collection:
We even went for secondary sources where we could find some information about the
management system of One Bank Limited. We search for information online in the official
website of world and many others.
This report has enormous scope and those are:
1. Clear picture of management structure of OBL.
2. Information about One Bank‟s management.
3. Discussion on HenriFayol‟s fourteen principles.
4. Detail discussion on One Bank‟s management in perspective of Fayol‟s fourteen principles.
As any study, this study has also some limitations:
1.Slight lack of interviewed persons.
2. Privacy of information.
3. Political issues such as hartal (strike).
DESCRIPTION OF HENRI FAYOL‟S PRINCIPLES RELATING OBL
1. DIVISION OF LABOR:
According to Henry Fayol under division of work, "The worker always on the same post, the
manager always concerned with the same matters, acquire an ability, sureness and accuracy
which increases their output. In other words, division of work means specialization. According to
this principle, a person is not capable of doing all types of work. Each job and work should be
assigned to the specialist of his job. Division of work promotes efficiency because it permits an
organizational member to work in a limited area reducing the scope of his responsibility. Fayol
wanted the division of work not only at factory but at management levels also. The Government
of Bangladesh and the country‟s donor community have taken a step forward towards closer and
more aligned cooperation with the agreement to develop a Joint Cooperation Strategy (JSC) by
2010. This JCS, which will emphasize inter alia, a better division of labor among donors and a
move towards better alignment with country systems in accordance with the Paris and Accra
agendas, will have to be taken into account in future programming strategies. One Bank has been
trying to follow this system ever since.
2. AUTHORITY AND RESPONSIBILITY:
Authority and responsibility go together or co-existing. Both authority and responsibility are the
two sides of a coin. In this way, if anybody is made responsible for any job, he should also have
the concerned authority. Fayol's principle of management in this regard is that an efficient
manager makes best possible use of his authority and does not escape from the responsibility. In
other words when the authority is exercised the responsibility is automatically generated.
OneBank cannot and will not turn a blind eye to evidence of corruption. They have both an
ethical obligation and a fiduciary responsibility to our shareholders and its customers. It is our
responsibility to make sure that resources are used for their intended purposes and that we only
finance a project when we have adequate assurances that we can do so in a clean and transparent
According to HenriFayol discipline means sincerity about the work and enterprise, carrying out
orders and instructions of superiors and to have faith in the policies and programs of the business
enterprise, in other sense, discipline in terms of obedience, application, energy and respect to
superior. In One Bank Limited, they observe referral based entry into low and unskilled jobs
with high costs to firms from worker shirking. For this they expect variation in the use of
workplace referral across sectors and job types. A higher prevalence of workplace referrals in
jobs where strong tie networks have the capacity to supply candidates. In contrast to Karlan
(2009), they expect more referral in low and unskilled jobs which are jobs ‟everyone can do‟.
There should be strong social ties between the worker and the referee when referee incentives are
aligned with the firm or when referee stakes are high. They observe referrals when the employer
has access to referees with high stakes (good positions, a lot to lose) in the firm. They observe a
negative relationship between referee stakes and the entrant‟s wage and between the strength of
ties and the entrant‟s wage. They observe a referral wage premium for jobs that have a high cost
of opportunism relative to jobs with low costs of opportunism. However, Fayol does not
advocate warming, fines, suspension and dismissals of worker for maintaining discipline. These
punishments are rarely awarded. A well-disciplined work force is essential for improving the
quality and quantity of the production.
4. UNITY OF COMMAND:
According to Fayol there are supposed to be appropriate, methodical and logical array of
physical and shared factors, such as land, raw resources, apparatus and equipment and employees
respectively. As per view, there should be protected, suitable and précised place for every article
and every place to be used effectively for a particular activity and service. In other words,
principles are that every piece of land and every article should be used properly, economically
and in the best possible way and selection and appointment of the most suitable person to every
job. There should be specific place for everyone and everyone should have specific place. As
One Bank Limited is a large organization, every employee here is not accountable to only one
manager. There are multiple managers and many subordinates work under them. So every
employee is not accountable to only one boss and they have many employers to respond to.
5. UNITY OF DIRECTION:
Fayol advocates "One head and one plan" which means that group efforts on a particular plan is
lead and directed by a single person. This enables effective co-ordination of individual efforts
and energy. This fulfills the principles of unity of command and brings uniformity in the work of
same nature. In this way the principle of direction create dedication to purpose and loyalty. It
emphasizes the attainment of common goal under one head. In case of One Bank, even this
principle is completely comparable since the subordinates are not under one boss and get the
same direction every day. In such a large organization like OBL, it is quite hard to maintain such
kind of principle where all employees will follow the direction of the same manager and work in
a unified manner. The employees belong to multiple teams working on differing plans. In matrix
environment of OBL, the employees are reporting their work to more than one person. This does
not necessarily negate Fayol‟s principle. In the bottom line workers are being lead by one team
leader and getting directed by that same person. If there is a separation of duties to other teams or
sets of workers, then the reporting would still go back to the Chairman, Mr.
SayeedHossainChowdhuryoverseeing the plan. So, this principle of Henry Fayol is partially
applicable in One Bank‟s managerial structure.
6. SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST :
The interest of the organization shouldcome before the interests of the individual workers. In
other words, principle of management states that employees should submit their personnel
interest before the general interest of the organization. Sometimes the employees due to this
ignorance, selfishness, laziness, carelessness and emotional pleasure overlook the interest of the
organization. This attitude proves to be very harmful to the enterprise. Every employee must be
dedicated and submissive to achieve the goal of the organization. It would not have been possible
for the organization to achieve its goals and work on different projects if the employees were not
cooperative enough and saw interest before the organizations. The employees are extremely
dedicated to the organization and work for the welfare and goal of the organization. Thus this
principle is evidently established in One Bank‟s managerial pattern.
7. FAIR REMUNERATION TO EMPLOYEES:
According to Fayol wage-rates and method of their payment should be fair, proper and
satisfactory. Both employees and employers should agree to it. Logical and appropriate wagerate and methods of their payment reduces tension and differences between workers and
management, create harmonious relationship and a pleasing atmosphere of work. In One
BankLimited, they recruit and retain highly qualified staff and have developed a compensation
and benefits system designed to be globally competitive, to reward performance, and to take into
account the special needs of a multinational and largely expatriate staff (One Bank, 2007).
Every employee is paid a fair compensation so that they stay focus at their work. The Bank
Group‟s staff salary structure is reviewed annually by the Executive Directors and is adjusted on
the basis of a comparison with salaries paid by private financial and industrial firms and by
representative public sector agencies (One Bank, 2010)
Fayol defined centralization as lowering the importance of the subordinate‟s role. The degree to
which centralization or decentralization should be adopted depends on the specific organization
in which the manager is working. There should be one central point in the organization which
exercises overall direction and control of all the parts. But the degree of centralization of
authority should vary according to the needs of situation. According to Fayol there should be
centralization in small units and proper decentralization in big organization. Further, Fayol does
not favor centralization or decentralization of authorities but suggests that these should be proper
and effective adjustment between centralization and decentralization in order to achieve
maximum objectives of the business. The choice between centralization and decentralization be
made after taking into consideration the nature of work and the efficiency, experience and
decision-making capacity of the executives.
Managers in hierarchies are part of a chain like authority scale. Each manager, from the first line
supervisor to the president, possesses certain amounts of authority. The President possesses the
most authority; the first line supervisor the least. Lower level managers should always keep
upper level managers informed of their work activities. The existence of a scalar chain and
adherence to it are necessary if the organization is to be successful.
For the sake of efficiency and coordination, all materials and people related to a specific kind of
work should be treated as equally as possible. According to Fayol there should be proper,
systematic and orderly arrangement of physical and social factors, such as land, raw materials,
tools and equipment and employees respectively. As per view, there should be safe, appropriate
and specific place for every article and every place to be used effectively for a particular activity
and commodity. In other words, principles are that every piece of land and every article should
be used properly, economically and in the best possible way and selection and appointment of
the most suitable person to every job. There should be specific place for everyone and everyone
should have specific place. This principle also stresses scientific selection and appointment of
employees on every job.
All employees should be treated as equally as possible. Employees must be treated kindly and
justice must be enacted to ensure a just workplace the principle of equality should be followed
and applicable at every level of management. There should not be any discrimination as regards
caste, sex and religion. An effective management always accords sympathetic and human
treatment. The management should be kind, honest and impartial with the employees. In other
words, kindness and justice should be exercised by management in dealing with their
subordinates. This will create loyalty and devotion among the employees. Thus, workers should
be treated at par at every level.
12. STABILITY OF TENURE OF PERSONNEL:
Retaining productive employees should always be a high priority of management. Recruitment
and Selection Costs, as well as increased product-reject rates are usually associated with hiring
new workers. One Bank Limited insists on not to hire out of desperation, notto hire an employee
because the company needed someone to fill the position yesterday. That is what temporary
employees are for. If OBL is looking for someone to fill the position long term, it is best to take
some time to do some research, gather as much information as one can about a job applicant.
Proper information is needed before hiring someone and those are: contact information for
personal and business references, a list of past and present employers, social security number,
birth date and more. These items will help the company complete reference checks and to
perform background checks to find out about any past criminal activity. Offering skill testing can
be helpful if a company wants to decrease employee turn-around. It can either be done directly
through human resource department or employers can contract this responsibility out to a job
placement agency. This is one of the tools that will help determine whether the employers have
found the best fit for each position your company has open. Not only that, but it also cuts down
on new applicant recruitment costs. One Bank Limited follows this form of testing or
Showing appreciation plays a major role here in OBL. Many employees almost always know
when they are doing a job wrong. However, these same employees very rarely ever hear from
their employers when they are doing their job right. Encouragingthe employees by saying kind
words to them, and telling how much of a good job they are doing makes them more likely to
accept any words of advice on how to improve their work later on.
Management should take steps to encourage worker initiative, which is defined as new or
additional work activity undertaken through self-direction.Ways that manifests employee
initiative might occur on a small scale, such as an employee jumping in to assist a coworker if
there's a backlog of work. By taking the initiative, this employee doesn't wait for direction from
his boss. He observes a need and he makes himself available. In addition, employees might show
initiative on the job by simply speaking up and offering suggestions. The employee might detect
cracks in the system and then brainstorm ways to fix these issues and improve productivity. The
employee might also do his homework and consider the financial aspect of implementing a new
Sometimes fear or uncertainty of how they'll be received by management prevents some
employees from taking the initiative. Managers and employers are not always open to
suggestions from their employees. Even if an employee has an inventive and useful idea,
employers might dismiss his idea or accuse him of exceeding his authority. This negative attitude
causes many employees to keep quiet with regards to change. Although OBL is trying to remove
this fear from the minds of the employees, this problem is still visible.
Being open to suggestions is the key to improving employee initiative. If a company establishes
an open-door policy and solicits suggestions from the staff, employees will feel comfortable with
taking the initiative and presenting new ideas. During staff meetings OBL opens the floor and
allows employees to discuss their concerns or ask questions. This creates a platform for
employees to express their thoughts on certain matters, and perhaps offer suggestions on ways to
improve production or the work environment. OBL also facilitates one-on-one discussions with
employees and invite them to express their opinions privately.
14. ESPIRIT DE CORPS:
Management should encourage harmony and general good feelings among employees. The big
question comes when as an individual member or a manager has a challenge to promote the team
spirit. This is one of the important aspect of OBL which not only drives the composition of any
team but also maintain the spirit it in future. There can be many ways to promote the “Team
Spirit” and there are different methods which suits different situations. Some of them are:
Giving Good Name to Teams- This is very important and the core tool. Teams need a
name; they need an identity to which they can relate to. Major brands have created an
image in minds of people and everyone relates to them very well. In same manner
employees need to give an image to the team to which they can relate to. Name like
Alpha, Romeo, Alligators, Roaring Tigers are just few names which we have used in
past. When used in a sporting spirit these names gives team members something to look
upon and feel proud of in tough situations.
Chartering out a Yearly Plan- When team members know what they have ahead in future
and how they would be evaluated it becomes easy for them to be prepared. OBL forms
the plan in form of breakup of events and associated points that make the evaluation
process extremely transparent. The activities can be in the form of the results related to
the work and other events which give them opportunity to score points.
Treatingemployees as Profit Centers- Treating each team as independent profit
center,assigning them goal and challenge them to score points can play a vital role in
promoting team spirit. One Bank Limited has taken various initiatives quarterly where
each team was evaluated on specific number of projects and winner was decided based
on their performance or target conversion. It worked wonders because some members
pitched in to help other members so that team target exceeds the expectations. While
doing this it is important to come out with some accolades and make sure that everyone
performs to their best.
Conclusion: to secure the maximum prosperity for the employer, coupled with the maximum
prosperity for each employee. Although they are now almost 100 years old , they continue to be
relevant today .
Fayol principles of management were written having industrial firms in mind. Obviously these
are for profit companies not applicable to non-profit organization. So some changes are needed
for applying them in non-profit organization .
Dhillon, A. and V. Iversen (2011): Referrals, social proximity and workforce discipline, mimeo,
Department of Economics, University of Warwick.
Kono, H. (2006): „Employment with connections: negative network effects,
Journal of Development Economics, 81: 244-258