PowerGen: The Power Generation Company of Trinidad & Tobago

PowerGen was established on 24 December 1994 with the divestment of the generation assets of Trinidad and Tobago Electricity Commission (T&TEC). PowerGen owns and operates the country’s three main power plants at Port of Spain, Point Lisas and Penal. Twenty one of its generating units are gas fired, with the generating units at Port of Spain power plant capable of operating either by oil or gas firing.

Our Vision is to be the leading supplier of quality energy, committed to the needs of our customers and sensitive to the environment.

Our Mission is to exceed our customers’ expectations for quality energy in a safe and environmentally responsible manner, creating value for our customers, employees and shareholders.

PowerGen’s Core Values are:

We take ownership!

We build mutually beneficial relationships!

We deliver results!

We care for country!1

We take responsibility for our success and we are accountable for our actions in our organisation!

We know our organisation and the market in which we operate!

We identify and explore opportunities for growth!

We strive to align our personal goals with that of the organisation!

We promote and safeguard a positive image of PowerGen!2

PowerGen recognizes that its future prosperity depends to a large extent on the hiring decisions made today. To this end, it is the policy of the Company to recruit the right persons for the right positions and to maintain a workforce best suited for the available positions through on-going training and development. The Company subscribes to the principles of equal opportunity in its recruitment and selection processes, selecting employees on the basis of merit, competency, advancement potential and character without reference to race, ethnic origin, religion or gender.

PowerGen – Not just Power, People too!1

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1 http://www.caribbeanjobs.com/The-Power-Generation-Company-of-Jobs-322.aspx

2 http://powergen-co-tt.web25.winsvr.net/AboutUs/CoreValues/tabid/66/Default.aspx

History of PowerGen

TRINIDAD AND TOBAGO ELECTRICITY COMMISSION (T&TEC) Pie Chart

The Trinidad and Tobago Electricity Commission was established as a Statutory authority in 1946 and operates under the Trinidad and Tobago Electricity Commission Act Chapter 54:70 which was revised in 1994 to allow the partial divestment of its generation assets. The Commission now has sole responsibility for the transmission and distribution of electricity throughout Trinidad and Tobago and currently supplies over 350,000 thousand customers.3

AMOCO TRINIDAD POWER RESOURCES

One of the power subsidiaries of bp, a world class oil and gas company, is AMOCO TRINIDAD POWER RESOURCES. AMOCO group which has extensive experience in the power sector on a worldwide basis.4

MARU ENERGY, LLC

Maru Energy, LLC is a wholly owned subsidiary of Marubeni Corporation of Japan. Marubeni Corporation operates in fairly diversified industries with a strong focus on power sector investment globally. Marubeni has built 72,000 MW of generating plant around the world, and currently owns equity interest in generating capacity in aggregate 17.000 MW.4

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3 http://www.energy.gov.tt/energy_resources.php?mid=9

4http://powergen-co-tt.web25.winsvr.net/AboutUs/Shareholders/tabid/63/Default.aspx

Present Day at PowerGen

PowerGen is a part of the dynamic energy sector in Trinidad and Tobago. It provides electricity to the Trinidad and Tobago Electricity Commission. It employees approximately 2,000 employees which are distributed at the three power plants and the main head office situated around the country.

The oldest power plant located in the capital city of Port-of-Spain is tentatively commissioned for closure by 2013. This is to be replaced by a new mechanised power plant situated in the suburban area of the city. This has sparked unrest among the employees since information obtained through the grapevines point to restructuring of staff making the organisation leaner.

In addition, the physical environment has been a cause for concern. Even though they follow high safety standards on Monday 24th May, 2010 there was a fire in the Port-of-Spain power plant which disrupted the electricity around the neighbouring constituencies.5 Apart from that, the two deaths caused by an explosion in June 26th, 2006 at the Penal power plant still resonates fear in the minds of employees.6

Recently, there seems to be an increase in employee absenteeism, high rate of employee turnover, low employee morale, poor productivity and decreasing profitability. In December 2009 PowerGen conducted a companywide study hoping to find the reasons for this downward turn and solutions to alleviate these problematic issues in order to remain profitable in an increasingly competitive environment.

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5 http://www.news.gov.tt/index.php?news=3981

6 http://www.trinidadexpress.com/news/Coroner__Arrest_PowerGen_employee-110895929.html

Introduction

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“Many of us spend a good deal of our life working. At work, we make friends, learn about ourselves, grow and develop, we become innovative, energized and stimulated. Working cooperatively with others, we are able to create positive energy that gives us joy and added value to our companies” (Lynda Gratton, 2007).

“People are the main resource of any organisation. Without its members an organisation is nothing, an organisation is only as good as the people who work within it” (Mullins 2010). Therefore, Mullins (2010) argues “the effective management of the people resource” is highly important for an organisation’s survival and success especially in an exceedingly dynamic and competitive environment which encompasses most organisations.

In Essence, the study of Organisational Behaviour (OB) is intrinsic for the organisation’s success. “Organisational Behaviour is concerned with the study of the behaviour of the people within an organisational setting. It involves the understanding, prediction and control of human behaviour” (Mullins, 2010).

Johns and Saks (2005) refer to OB as the systematic study of the attitudes and behaviours of individuals and groups in organisations and provide insight about effectively managing and changing them. In addition, OB could be generally defined as “the study and understanding of individual and group behaviour and patterns of structure in order to help improve organisational performance and effectiveness” (Robbins and Judge, 2007).

Thus, the study of OB is concerned with many facets of organisational life and according to Hellriegel, Slocum and Woodman (1999), “One way to recognise why people behave as they do at work is to view an organisation as an iceberg. What sinks ships isn’t always what sailors can see, but what they can’t see.” Therefore, it is just as important to study the covert behavioural aspects of an organisation (attitudes, communication patterns, informal team processes, personality, underlying competencies and skills and conflict) as well as the overt formal aspects such as; technology, formal goals, rules and regulations, organisation design, physical facilities and surface competencies and skills. With this in mind, the PowerGen Company will be evaluated using four main OB issues in order to view the organisation holistically. These are: organisation structure, leadership styles, power and authority and motivation.

Statement of Problem

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Mullins (2010), work organisations are structured to create an environment that facilitates optimum working conditions. In order for maximum productivity to take place reconciliation of the organisation’s needs with that of the employees’ must happen. Therefore, an evaluation of the workers’ needs and PowerGen’s needs to know whether there is synergy or disharmony is necessary.

Aims and Objectives

In this study, there will be an evaluation of organisational behaviour issues in relation to the Power Generation Company to assess the causes for the current lack of productivity.

Objectives:

To assess the importance of having a good organisational structure and how this impacts on the behaviour of employees and the overall performance of the organisation.

To determine the effect of leadership style on the behaviour of employees and their level of commitment to tasks.

To evaluate the impact of power and authority in the organisation and how this impacts on behaviour.

To assess if a relationship exists between motivation and employee productivity.

To recommend any necessary changes in order to solve the issues stated above.

Literature Review and Analysis

Organisation Structure:

Bryans and Cronin (1983) state, a business establishes an organisation structure in an attempt to create a framework to facilitate the meeting of objectives. This structure in the organisation has an impact on roles, communication flow, location of authority and responsibility, efficiency and effectiveness. Also, it serves as the “formal power base or hierarchy within the organisation, and constitutes an important influence in the development of members’ attitudes and behaviour.”

Baptiste (2000) asserts that organisation structure is a way of allocating work roles, administrative and other responsibilities that creates a pattern of interrelated work activities and allows the organisation to conduct, coordinate and control its work activities.

Burns and Stalker (1963) as cited in Baptiste (2000) distinguish two types of organisations. These are: “mechanistic” and “organismic” which is later known as “organic.” A mechanistic organisation is rigid and is well suited for a bureaucratic structure where decision making is routine and the environment is a relatively stable one. On the other hand, an organismic organisation is flexible since the environment is rapidly changing and requires non-routine and innovatory decision making.

According to Burns and Stalker (1963), PowerGen operates as a mechanistic structure with a high degree of specialised jobs with each level of the hierarchy having immediate supervision and coordination. There is a hierarchical structure of control, in addition to authority and communication. To reinforce the hierarchical structure, there is centralisation of information and decision-making at the top of the hierarchy. Also, there is “vertical interaction” between superiors and subordinates. Lastly, loyalty to the organisation is enforced as well as obedience to higher authority. All of these characteristics can impact on the morale of employees and productivity.

Centralised decision-making isolates senior management from the rest of the organisation and therefore, subordinates tend to feel a sense of alienation. They feel isolated from the company’s goals and objectives because employees are not integrated into the creation of the business strategy and objectives. This alienation can lower employee morale and lower productivity levels. According to Karl Marx (1844) as cited in Barnard, Burgess and Kirby (2004), alienation is a systemic result of capitalism which is inherent in the work environment. For Marx, work should be fulfilling and satisfying since it involves a creative process however, the capitalist system of work sucks the creativity and satisfaction out of this process. The bourgeoisie owns and controls the means of production and exploits the workers for their labour in return for a minimal wage. These workers become “wage slaves”. So too, since PowerGen is operating in a Capitalist mode of production workers will feel alienated and exploited by senior management who acts as the bourgeoisie in the post-industrial era.

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7 http://www.ega.edu/facweb/strickland/soci1101online/CHAPTEROUTLINES/OutlineCHAPTER06.html

Also, the hiring practices may be based on a rigid set of formal requirements rather than the ability to perform the tasks involved in a job. Lastly, actual problems do not always fit into the compartments designed to handle them; this can lead to a “run around” for people trying to resolve problems.

In addition to a bureaucratic structure, PowerGen displays a functional structure as depicted in Appendix A, Figure 1.1 Mintzberg (1983) argues that “machine bureaucracy” is highly formalised and there are direct supervision and standardisation of work processes. This type of organisation is necessary due to the fact that work procedures, if altered can result in accidents and loss of life. Therefore, functional structures allow maximum supervision and control. Also, the need for specialised people to manage complex problems and situations where good decision-making is central to the operations is necessary.

However, good decision-making also entails quick decision-making which can be a problem with functional structures. Centralised decision-making by the managing director or senior management team is understood consequently, due to the increasing size of the organisation; communication can be slow, stressful and have “red tape.” Gordon (1996) argues that a functional structure is not appropriate where rapid communication is necessary. Therefore, the disadvantages previously outlined by having a mechanistic, bureaucratic and functional organisation structure may the reason for loss of productivity and unhappy employees.

Leadership Style:

Charles Handy (1976) states that, “a leader is one who shapes and shares a vision which gives point to the work of others.” Bryans and Cronin (1983) argue that leadership is a vital part of the control system in an organisation. If executed well, managers can influence the behaviour and attitudes of their subordinates thus, getting them to work efficiently.

PowerGen being a bureaucratic structure, the executive and line managers subscribe to an autocratic leadership style (Lewin et al. 1939). By enforcing this style of leadership, productivity remains high but when management is not present there is a significant decline in productivity. In addition, workers develop a nonchalant attitude to work when they are not being coerced. There is a high commitment level from workers to complete tasks when the autocratic style is used however, if workers are left alone, they are not committed to completion of their tasks. Recently, management used a consultative style as advocated by Likert (1961) and there has been more cooperation from employees and a two – way exchange of information. However, this style has been trumped by the dogmatic, callous and intemperate leaders who are fixed on being authoritarian leaders.

It can be argued that the autocratic leadership style employed is centred on controlling the workforce. For Lewin et al. (1939) and The Survey Research Centre at the University of Michigan (1950s and 1960s) cited in Bryans and Cronin (1983) assert that an autocratic leadership style might facilitate productivity but job satisfaction and employee morale can be severely affected. Using a democratic or participative approach is more suited for managing workers since they can be involved in the decision-making process of how to carry out tasks which is done by group discussions (Mullins, 2010).

However, Fiedler (1967) and Tannenbaum and Schmidt (1958) as cited in Baptiste (2000) argue that the leadership style of a manager by itself does not encourage or discourage employees’ productivity levels. There are situational variables that must be taken into account. For instance, the employees at PowerGen might not want to be given autonomy of their actions and may prefer to be led. In addition, the tasks to be carried out at PowerGen would require leaders with technical expertise and knowledge to delegate workers and ensure efficiency in workers’ duties therefore, the leadership role cannot be taken lightly and handed over to subordinates. As such, the situational leader might be the ideal type.

In addition, the argument wages on whether or not leaders are born and not made. The view that leaders are born is gleaned from the trait theory. Gordon (1996) asserts, more than one hundred studies indicate that leadership traits are inherent in the person’s social and physical characteristics. This view has been highly criticised. For the contingency theorists, leaders are not born but also cannot be made. They doubt the fact that someone can be trained to produce an ideal style of leadership. PowerGen implements leadership training programmes for managers and supervisors but according to Fiedler (1967) it is easier to change the situation of the leader than to change the leader’s style.

As Mullins (2010) states there is no one “best” leadership style. Different leadership styles are needed to cope with different organisational situations. Different types of leadership may also vary at different stages in the development of an organisation. Leadership alone cannot increase productivity and efficiency; it must be coupled with other factors to be beneficial.

Power and Authority:

Dahl (1957) as cited in Bryans and Cronin (1983) interprets power as the capability to exercise influence over the behaviour of others. As such that A has something (power) over B to the extent that A can get B to act in a certain way that B would not normally do. While, authority is when someone has the right to impose influence and is equivalent to legitimate power.

In an organisation such as PowerGen, power and authority is imbedded in the minds’ of workers at the top echelons of the organisation’s structure because the hierarchical, bureaucratic structure is meant to impose these values on them. According to Weber (1964) as cited in Bryans and Cronin (1983) “rational legal authority” is understood as part of the work structure. Employees recognise this power as a part of the manager’s role and function in the organisation.

PowerGen exudes in its culture the drive for power and authority. This is seen by their core values (We take ownership!) which become a living part of the organisation and its employees. According to George Herbert Mead (1913) as cited in Barnard, Burgess and Kirby (2004), the theory of “Symbolic Interaction” speaks about the meanings that humans place on symbols though a process of interaction. One of the most important symbols is language. Therefore, as PowerGen incorporates this drive for power in their written values implies that employees must take this concept seriously.

The value system also makes up the organisation’s culture. For Schein (1992), culture is “a pattern of basic assumptions – invented, discovered or developed by a given group as it learns to cope with its problems of external adaptation and internal integration – that has worked well enough to be considered valuable and therefore to be taught to new members as the correct way to perceive, think, and feel in relation to these problems” Therefore, the need for power and authority is intrinsic in the organisation. If employees are assertive and decisive then this culture will be right for them however, once employees are submissive and indecisive this culture becomes a problem for these individuals. Problems of social consensus, integration and social solidarity can arise and workers can feel isolated and bewildered.

In addition, PowerGen’s workforce consists of mostly males. Peter Wilson ( ) in his work on “Reputation and Respectability in the Caribbean” argues that men are concerned about their reputation while women are concerned with respectability. This reputation is gained by achieving “machisimo” which is done through conquest. So too, males in the workplace are concerned with their reputation and strives for power and authority to achieve influence over others. The organisation shows semblance of a patriarchal structure.

French and Raven (1959) distinguishes five types of power in an organisation. These are: position or legitimate power, resource or reward power, coercive power, expert power and personal or referent power. Regardless of which type of power is used by leaders, it can either serve to fulfil the organisation’s goals or disintegrate the fabric of the organisation.

Motivation:

Citing from Mullins (2010), the Chartered Management Institute (2006) defines motivation as, “the creation of stimuli, incentives and working environments that enable people to perform to the best of their ability. The heart of motivation is to give people what they really want most from work. In return managers should expect more in the form of productivity, quality and service.”

Mullins (2010) claims the needs and expectations of workers can be classified into two groups; the physiological or extrinsic motivators and the social or intrinsic motivators. Extrinsic motivators are “tangible” rewards such as; salary, fringe benefits, security and contract of service whereas, the intrinsic motivators are “psychological” rewards such as; positive recognition, receiving achievement, and being treated in a kind manner. However, each individual needs may vary and therefore, there is no right way to motivate staff.

Moreover, when workers are motivated they perform their tasks efficiently and therefore, achieve the organisation’s goals. When workers are de-motivated there are high rates of absenteeism, high turnover rates and low levels of productivity as seen in the December 2009 study done by PowerGen. What are the reasons for this and how to improve motivation?

Can money motivate employees to perform efficiently? For F.W. Taylor, “Scientific Management” cited in Mullins (2010) money is the main motivator. Employees are viewed as the “rational economic man” where pay incentives drive workers to produce efficiently. For PowerGen’s workers even though money is a significant motivator, it is not the main one.

Considering at the content theories, Maslow (1954) cited in Mullins (2010), claims that workers have a “hierarchy of needs” that must be met for motivation to take place. Looking at figure 1.2 below, the lower order needs; physiological, safety and social needs must be satisfied before the higher order needs; esteem needs and self-actualization can be satisfied. At PowerGen the safety needs are not satisfied. Workers are faced with stressful and dangers situations such as fires, explosions and even death on a daily basis. Not to mention, at the Port-of-Spain power plant the machinery and equipment are very dated and can pose a threat to workers’ safety. Also, due to the upcoming closure of the plant workers have mixed reactions about job security. No one is certain to retain their job.

Figure 1.2 Maslow’s Hierarchy of Needs

Source: The Spartan Student, 2010. The Animal of Acorn Abbey [online] Available at: < http://www.google.tt/imgres?imgurl=http://1.bp.blogspot.com/_-A7-TY0PBXs/TECiGiWgEDI/AAAAAAAAA0w/Y_xQjU78Jnc/s400/maslows_hierarchy> [Accessed 12 December 2010].

Furthermore, Alderfer’s (1972) “ERG Theory” cited in Mullins (2010) condenses Maslow’s five levels of needs to three levels. They are: existence, relatedness and growth needs. Existence needs are basic physiological needs and safety needs, moreover protection from physical danger. Again it can be noted that the workers’ existence needs are not satisfied therefore, if such a fundamental need is not met, workers cannot be motivated.

Herzberg (1959) cited in Baptiste (2000) came up with an approach to job satisfaction called the “motivation – hygiene theory.” The hygiene factors such as: organisation policy and administration, supervision, salary, interpersonal relations and working conditions, if this is absent can cause job dissatisfaction. PowerGen workers are dissatisfied because of the bureaucratic organisation structure, autocratic leadership style and the poor working conditions. In contrast, the motivators such as: achievement, recognition, work itself, responsibility and advancement can cause job satisfaction. The workers at PowerGen have advancement opportunities as well as an annual recognition and awards ceremony which gives awards to employees after they have served the company between ten to thirty five years. Awards are also given out for “Best Department of the Year” and “Safety Recognition.” However, these efforts on behalf of the company do not assist in job satisfaction for the employees.

In contrast to Taylor’s “rational economic man” the Human Relations School postulated the “social man view.” “This view emphasises the social factors of work, such as: the significance of the informal organisation, managerial leadership styles and effective communication systems” (Bryans and Cronin 1983). McGregor using this approach developed the “Theory X and Theory Y” school of thought (Bryans and Cronin 1983). He believed that whatever assumptions managers adopt about workers can create a “self-fulfilling prophecy.” For instance, a manager viewing workers as “Theory X” will think workers are lazy, dislikes work and evades responsibility will adopt an autocratic approach which can force workers to become this way even if they are not. This seems to be the case with workers at PowerGen. However, adopting the “Theory Y” approach, workers are viewed as keen to accept responsibility, like work and can exercise self- control. Therefore this type of manager would use a participative leadership style.

Lastly, Vroom’s (1964) “Expectancy Theory” cited in Mullins (2010) states an employee will be motivated to work harder if the end result is desirable. Therefore, PowerGen’s employees are not motivated because there are no enticing rewards. For instance, there are no year-end bonuses, pay incentives, or other fringe benefits as well as social recognition. For Locke et al (1981) cited in Mullins (2010) financial incentives can help workers to achieve their personal goals which in turn produces a more productive worker and thus, achieves the goals of the organisation.

Motivation of employees in an organisation is never an easy task to accomplish however, if it is done can create a profitable organisation.

Recommendations

The bureaucratic structure can be adjusted to limit all of the dysfunctions of bureaucracy. One way can be to establish a flatter hierarchy with decentralised decision making (Mullins 2010). In addition, Burns and Stalker (1963) cited in Baptiste (2000) claims that adopting an “organic” structure can be more flexible than a “mechanistic” one.

Also, a participative or democratic leadership style should be used (Lewin et al 1939). This allows group decision making and facilitates integration and communication. Allowing workers to be a part of the decisions advocates involvement from all members of staff which facilitates assimilation of company’s objectives.

Power and authority can be extended to subordinates in situations that are non-threatening to the organisation. This helps to empower workers who will want to achieve the company’s goals.

For Gary Kusin (2005) cited in Mullins (2010), “work is about letting people know they are important, their hard work and efforts matter, and they’re doing a good job. And this kind of recognition, in fact, can sometimes be more important than money.” This was also echoed by McClelland (1961) cited in Bryans and Cronin (1983) who states, employees need “continual feedback, since it is only from the knowledge of success that satisfaction is derived.”

In addition, employees can be motivated by non-financial rewards. Elton Mayo in the 1930s came up with the “Hawthorne Effect” cited in Bryans and Cronin (1983) where employees will work more efficiently if they are given recognition such as: a public handshake for a job well done or an employee of the year award.

Lastly, Herzberg (1959) cited in Baptiste (2000) states job satisfaction can be achieved by job rotation, job enlargement and forming autonomous work groups. This involves training workers in a variety of tasks, including tasks in the job to add enrichment and having workers’ input in job design as well as giving them freedom to carry out tasks.

Conclusion

The research has shown that the workers’ needs at PowerGen are disharmonious with the organisation. In addition, the organisational structure can impact on the behaviour of workers and their performance because it forms the basis of the company. The structure becomes the hub where all the activity is centred around and therefore, must suit the needs of all the stakeholders.

Management leadership styles can ultimately affect workers’ attitudes and serve to gain commitment from them or can become a hindrance to the organisation. The leadership style should be one that can gain efficiency from workers and therefore must be in synergy with the organisation’s structure.

Power and authority used in a callous manner can disintegrate any organisation. Power and authority is inherent in all organisations and must therefore be used wisely. It can assist in getting the job done effectively and also, ineffectively.

Lastly, motivation is directly linked to worker productivity. Hence, all efforts should be made by the organisation to keep workers motivated. A happy worker is a hard worker and after all companies prefer hard workers since this will lead to greater productivity, profitability and sustainability in a competitive environment.

Appendix A

Figure1.1 PowerGen’s Organisational Chart

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Source: PowerGen, 2008. Organisational Chart [online] Available at: < http://powergen-co-tt.web25.winsvr.net/People/OrganisationalChart/tabid/72/Default.aspx> [Accessed 18 November 2010].

Appendix B

Table1.1 HENRI FAYOL’S (1916) 14 PRINCIPLES OF MANAGEMENT

1. Division of work:

The work in an organization must be divided among individuals and departments. Division of work leads to specialization. It results in accuracy, speed and neatness in work. Specialization also leads to innovation.

Henri Fayol advocated division of work, because every change of work requires adaptation or adjustment which reduces output. However, division of work has its own limits which should not be exceeded.

2. Authority and Responsibility:

Fayol stressed that authority should be equal to responsibility. If authority is in excess of responsibility, then the manager may be tempted to misuse it. On the other hand, if a person is held responsible without giving him adequate authority, then he may feel frustrated.

In other words, authority should not be more and less responsibility. Again, responsibility should not be more and less authority. There should be a proper balance between authority and responsibility.

3. Discipline:

Fayol stressed the need for discipline in an organization. Discipline involves not only obedience to rules and regulations of the organization, but more importantly it involves application and dedication on the part of the employees. It also involves outward marks of respect.

Fayol wrote that the best means of maintaining discipline is to have disciplined superiors at all levels, clear and fair agreements, and judicious use of all penalties.

4. Unity of Command:

It means a subordinate should receive orders from only one superior. There should not be multiple bosses. The subordinate should not be made to report to several bosses.

Fayol observed that if one subordinate receives orders from more than one superior, then everything will be in disorder. Lack of unity of command is like “Too many cooks spoil the soup.”

5. Unity of Direction:

There should be ‘one head, and one plan’ for a group of activities having the same objective. There cannot be different plans for the same group of activities having the same objective.

6. Subordination of individual interest to general interest:

The interest of one employee or a group of employees should not prevail over that of the entire organization. Every employee or a group should work in the interest of the organization and not for their own self-interest.

In other words, the interest of the organization should come first and then individual or group interest. This can be ensured by: good example on the part of superiors, having fair agreements, and constant supervision.

7. Remuneration:

Wages and salaries should be fair. It should depend on circumstances, such as cost of living, ability of the company to pay, prevailing wage rates in the industry, etc. Also, the value of the employee must be taken into consideration.

Fayol stressed that apart from financial benefits, non-financial benefits should be provided such as good working conditions, canteen facilities, recreation facilities, etc.

8. Centralization:

Fayol stated that certain matters are to be centralized and others to be decentralized. There is a need to have a proper balance between centralization and decentralization. He advised that extreme centralization or decentralization is to be avoided, especially in large companies.

9. Scalar Chain:

It refers to the line of command from top level to the lowest level. He felt that scalar chain needs to be followed, but not at all times.

He stressed that the scalar chain can be short-circuited or broken if the situation so demands in the interest of the organization. He advocated the ‘Gang-plank Principle’. Gangplanks should be used to prevent the delay of action

10. Order:

Fayol stated that there should be order in the organization. He stressed that there should be a place for everything, and everything must be in its place. Again, there must be a place for everyone, and everyone must be in his place

Thus, this principle requires the orderly organization and placement of men, machines and other resources. Misplacement would lead to misuse and disorder.

11. Equity:

All members of the organization should be treated equally, depending upon the performance and circumstances. In other words, there must not be any partiality in transfers, promotions, etc. Fayol stressed that managers must exercise justice and kindness while dealing with their subordinates.

12. Stability of Tenure:

Fayol pointed out that managers as well as non-managers need time to learn and understand their jobs. If they leave or are removed within a short period of time, the learning time will be wasted.

In other words, employees should not be kept temporary for a long period of time. Employees should be made permanent so that they do not leave the organization. However, incompetent persons need to be removed or replaced and those who perform well must be rewarded.

13. Initiative:

The superior must sacrifice his own vanity to encourage and inspire those under him to order to show initiative. Subordinates should be given freedom to come up with suggestions and ideas. This will not only add to the success of the organization but will also boost the morale of the subordinates.

14. Esprit de Corps:

The superior must encourage esprit de corps (team spirit) among his subordinates. It is the team spirit that results in loyalty, and dedication and commitment of the employees.Fayol warned of the consequences of divide and rule, and abuse of written communications. It is the team spirit that often brings success to the organization.

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Source: Marino, V., 2010. 14 Principles of Management (Henri Fayol) [online] Available at: <http://www.12manage.com/methods_fayol_14_principles_of_management.html> [Accessed 20 December 2010].

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