Fayol's 14 Principles of Management

The Principles of Management are the essential, underlying factors that form the foundations of
successful management. According to Henri Fayol in his book General and Industrial
Management (1917), there are 14 'Principles of Management'.

1. Division of Work - According to this principle the whole work is divided into small tasks. The
specialization of the workforce according to the skills of a person, creating specific personal
and professional development within the labour force and therefore increasing productivity;
leads to specialization which increases the efficiency of labour.
2. Authority and Responsibility - This is the issue of commands followed by responsibility for
their consequences. Authority means the right of a superior to give enhance order to his
subordinates; responsibility means obligation for performance.
3. Discipline - It is obedience, proper conduct in relation to others, respect of authority, etc. It is
essential for the smooth functioning of all organizations.
4. Unity of Command - This principle states that each subordinate should receive orders and
be accountable to one and only one superior. If an employee receives orders from more
than one superior, it is likely to create confusion and conflict.
5. Unity of Direction - All related activities should be put under one group, there should be one
plan of action for them, and they should be under the control of one manager.
6. Subordination of Individual Interest to Mutual Interest - The management must put aside
personal considerations and put company objectives firstly. Therefore the interests of goals
of the organization must prevail over the personal interests of individuals.
7. Remuneration - Workers must be paid sufficiently as this is a chief motivation of employees
and therefore greatly influences productivity. The quantum and methods of remuneration
payable should be fair, reasonable and rewarding of effort.
8. The Degree of Centralization - The amount of power wielded with the central management
depends on company size. Centralization implies the concentration of decision making
authority at the top management.
9. Line of Authority/Scalar Chain - This refers to the chain of superiors ranging from top
management to the lowest rank. The principle suggests that there should be a clear line of
authority from top to bottom linking all managers at all levels.
10. Order - Social order ensures the fluid operation of a company through authoritative
procedure. Material order ensures safety and efficiency in the workplace. Order should be
acceptable and under the rules of the company.
11. Equity - Employees must be treated kindly, and justice must be enacted to ensure a just
workplace. Managers should be fair and impartial when dealing with employees, giving
equal attention towards all employees.
12. Stability of Tenure of Personnel - Stability of tenure of personnel is a principle stating that
in order for an organization to run smoothly, personnel (especially managerial personnel)
must not frequently enter and exit the organization.
13. Initiative - Using the initiative of employees can add strength and new ideas to an
organization. Initiative on the part of employees is a source of strength for organization
because it provides new and better ideas. Employees are likely to take greater interest in the
functioning of the organization.
14. Esprit de Corps/Team Spirit - This refers to the need of managers to ensure and develop
morale in the workplace; individually and communally. Team spirit helps develop an
atmosphere of mutual trust and understanding. Team spirit helps to finish the task on time.
 Demonstrate Respect at Work

Ask anyone in your workplace what treatment they most want at work. They will
likely top their list with the desire to be treated with dignity and respect. You can
demonstrate respect with simple, yet powerful actions.

Demonstrating respect is the most important interaction that you can have
dealing with the everyday people who populate your work life. Here's how to
demonstrate respect when you're dealing with people.

 Trust and Be Trusted

Trust is the cornerstone when dealing with people interdependently at work.

Trust forms the foundation for effective communication, positive interpersonal
relationships, and employee motivation and contribution of discretionary energy,
the extra effort that people voluntarily invest in work.

When trust exists in an organization or in a relationship, almost everything else is

easier and more comfortable to achieve. In dealing with people, trust is critical to
forming supportive relationships that enable accomplishments and progress.

 Provide Feedback With an Impact

Feedback is communicated to a person or a team of people regarding the effect

their behavior is having on another person, the organization, the customer, or the
team. Make your feedback have the impact it deserves by the manner and
approach you use to deliver feedback.

In dealing with everyday people, your feedback can make a difference if you can
avoid a defensive response. How you approach and provide feedback in dealing
 with people is the difference between effective work relationships and conflict
and hard feelings.

 Receive Feedback With Grace and Dignity

Are you interested in how other people view your work? Make it easy for them to
tell you. If they think you'll appreciatively consider their feedback, you'll get lots
more. And, that is good, really. In dealing with people, objective feedback from
people who care about you can stimulate continuous improvement or confirm
that you are on the right track.

Feedback allows you to adjust your course and direction in dealing with
situations, people, and challenges at work. Your objective in dealing with people
and their feedback is to get more - how you receive feedback is the key.

 Show Appreciation

You can show appreciation every day when dealing with people. You can tell
your colleagues, coworkers, and employees how much you value them and their
contributionany day of the year. Trust this fact. No occasion is necessary. In fact,
small surprises and tokens of your appreciation spread throughout the year help
the people in your work life feel valued all year long.

Demonstrating appreciation in dealing with your everyday people is a powerful

way to interact with and demonstrate your care. Your coworkers feel cherished
when you are dealing with them as if you really do care about and appreciate
them when you do. Fake, fake gets you nowhere here.

 Build Necessary Alliances

An ally is an associate who provides assistance and often, friendship. Your allies
are likely to support your views and causes. They help solve problems, provide
advice, act as a sounding board when you need a listening ear and offer a
different perspective so you can view your organization more broadly.
 Sometimes allies tell you that you are wrong in your assumptions, uninformed in
your choices, and heading in the wrong direction. In dealing with the everyday
people in your work world, nothing is more important than having allies who tell
you the truth. They are critical to your success at work.

Developing alliances that allow you to accomplish yours and your company's
mission is critical. Here are ten tips that will help you develop work alliances that
will help you accomplish your work mission and goals.

 Play Well With Others to Develop Effective Relationships

You can torpedo your job and career through the relationships you form at work.
No matter your education, experience, or title, if you can't play well with others,
you won't succeed.

Effective relationships create success and satisfaction on the job. Learn more
about seven effective work relationship musts. Combat dealing with difficult
people with these work relationship musts.

 Overcome Your Fear of Confrontation and Conflict

Meaningful confrontation is never easy, but the conflict is often necessary if you
want to stick up for your rights at work. Whether the confrontation is over shared
credit, irritating coworker habits,d approaches, or about how to keep a project on
track, sometimes you need to hold a confrontation with a coworker.

The good news is that while confrontation is almost never your first choice, you
can become better and more comfortable with necessary conflict. Find out how
dealing with difficult conflicts at work is easier and more positive with these steps.

 Have Difficult Conversations

Have you encountered any of these examples of dealing with difficult people at
work? They're just samples of the types of behavior that cry out for responsible
feedback.
 These steps will help you hold difficult conversations when people need
professional feedback. Dealing with a difficult conversation can have positive
outcomes.

 Consciously Create Team Norms

The members of every team, department, or workgroup develop particular ways

of interacting with and dealing with each other over time. Effective interpersonal
communication among members and successful communication with managers
and employees external to the team are critical components of team functioning.

How a team makes decisions, assigns work, and holds members accountable
determines team success. With the potential power of the impact of these
interactions on team success, why leave team member interaction to chance? In
dealing with an effective team, you need to form team relationship guidelines or
team norms early to ensure team success.

21st Century Milestones

Over the last 15 years, several watershed events helped define the practice of
internal auditing.
Doug AndersonFebruary 15, 20160 Comments

Internal auditing, like the organizations it serves, is never dull. Practitioners are affected by the
changing activities of their clients, but also by events in the broader business world. In this
century alone, so far, numerous events have had a significant impact on the profession. Should
we have seen these coming? What caused them? How do we learn from them going forward?
Four events, in particular, shifted the profession in one form or another. Each has had a
considerable influence on internal auditing as it’s practiced today, and has helped define the
role of today’s auditor.

1. Flagrant Financial Reporting Fraud

Financial reporting fraud has most likely been present since the beginning of financial reporting
itself. But the extent and audaciousness of the reporting frauds at the start of the 21st century
were unprecedented. While Fortune magazine named Enron “America’s most innovative
company” for six years, little did anyone know that its greatest innovation may actually have
been dreaming up new ways to deceive auditors and investors. And Enron was not alone as we
consider WorldCom, Tyco, and others.
The biggest impact on internal auditing as a result of these scandals was probably the U.S.
Sarbanes-Oxley Act of 2002 — particularly Section 404, which focuses on internal controls over
financial reporting. A problem companies and external audit firms faced was that many
employees lacked internal control expertise. Company personnel had for years been working to
squeeze costs out of routine processes, and external audit firms had shifted away from detailed
testing of processes. I recall a conversation I had with a Big Four audit partner in 2003 who told
me that in his firm only the “old timers” like us — we were in our mid-40s at the time — knew
anything about testing internal controls. Most companies looked to their internal auditors to help
them understand controls and comply with the new law. We all learned that while financial
reporting was supposedly mature, internal auditors cannot ignore a risk area just because we
have become comfortable with it.

2. Financial Markets Meltdown

What does one do when banks that are “too big to fail” look like they are going to collapse under
the weight of toxic loans and market illiquidity? I recall a conversation with a Fortune 50 chief
financial officer in 2008 who said that a government bailout was needed, as liquidity in the
banking system is like blood in the human body — when it is missing, nothing works and a
transfusion is required. I am neither a banker nor a medical doctor, but these events taught us
all a lot about risk. While enterprise risk management (ERM) was birthed before the financial
market meltdown, ERM’s lack of maturity became painfully evident during this period.
Financial institutions that were revered for their ERM expertise were the same ones that
apparently didn’t fully understand risk or see concentrations of risk. Many internal auditors who
had been trained to audit internal controls over financial reporting were now asked to roll up
their shirt sleeves to help implement or improve ERM processes.
One outgrowth of the increased attention to ERM was further development of the Three Lines of
Defense governance model. This model helped outline the role of internal audit versus line
management and others like ERM functions. The “best” role for internal audit in ERM has not
been agreed upon, nor probably will it ever be, given the differences among organizations. But it
is clear that internal auditing needs to live and breathe risk.

3. Cybersecurity
A newer issue for virtually every organization is cybersecurity risk. What started as seemingly
isolated attacks on companies for specific purposes has grown into a generalized concern over
security of all electronic data. Today, it would be difficult to find a board of directors that doesn’t
have cybersecurity on its agenda.
Internal auditors were often caught unprepared for this risk. For decades, many audit functions
have struggled to find enough qualified IT auditors. With cybersecurity risk, that task is even
more difficult. I recall meeting a cosourced team of penetration-testing auditors and wondered
whether any of them had graduated from high school yet. The technology is new, and the way it
is implemented relies on methods that didn’t exist at the beginning of the 21st century.
4. Bribery and Corruption
Bribery and corruption have been part of human history for about as far back as records exist.
The U.S. Foreign Corrupt Practices Act (FCPA) was passed into law in 1977 to help combat
fraud of this nature. But what has changed recently? Attention and focus. Many countries have
passed new laws addressing bribery — some stronger than the FCPA, like the U.K.’s Bribery
Act 2010. Every company of reasonable size faces risk not only of bribery perpetrated by its
employees, but also of violating strict laws that are strongly enforced.
Perhaps the most glaring example of bribery occurred at German industrial group Siemens,
where it was reported that processes organized to implement bribery payments were quite
mature. But any observers who think the risk only involves large organizations would be fooling
themselves. All it takes is one person with access to cash for bribery to become a risk.

5 Global Trends in Internal Auditing

Richard ChambersJuly 11, 20160 Comments

In a blog last January, I shared "5 Resolutions for Every Internal Auditor in 2016." At the outset of the year, I urged
members of the profession to:

 Be attuned to upcoming regulatory changes

 Advocate for mandatory internal audit in publicly traded companies
 Be wary of internal auditing's expanding scope of work
 Invest in talent management
 Step out of their "comfort zones"

As we enter the second half of 2016, I still believe these are initiatives worth the pursuit of everyone in our profession.
However, the events of the first half of the year have also highlighted some ongoing and emerging trends that warrant
our continuous focus. While I have referred to some of these trends in the past, fresh data and recent events reaffirm
these are trends worth watching and addressing for members of the internal audit profession.

 Enhanced Internal Audit Stature Is Driving Global Growth

Despite the occasional criticism of internal audit, the profession continues to ride a decade-long wave of enhanced
stature and growth. During that period, we have seen transformation of reporting relationships – often at the behest of
regulators who recognize that independence is vital for internal audit functions. In 2016, almost half of CAEs
worldwide indicate that they report administratively to their CEOs, and 70 percent report functionally to either the
audit committee or full board of their organizations. Stature is being enhanced hand-in-hand with growth in the
profession. If one assumes that IIA membership reflects trends in the growth of the profession, then the number of
internal auditors worldwide has increased more than 60 percent since the end of 2005. Even more impressive, The
IIA's membership growth would indicate that the profession has grown almost 20 percent since the onset of the global
economic crisis in 2008. It is an impressive feat to record that level of growth during a period in which corporate
spending and profits were under extraordinary pressure.

 Stakeholders Are Deriving Value but Still Want to See Us Raise the Bar
As I frequently observe, the enhanced stature and growth of the profession is a reflection of the value being derived
by internal audit's stakeholders. After all, one would rarely invest more resources in a suboptimal product. However,
in 2016, we are hearing directly from internal audit's stakeholders thanks to the most comprehensive global
stakeholder survey ever undertaken. In the soon-to-be-published CBOK report "Voice of the Customer –
Stakeholder's Messages for Internal Audit," more than 90 percent of stakeholders say they believe their internal
auditors assess areas that are significant to their organization, and almost 90 percent report that internal auditors are
assessing their organization's financial, operational, and compliance controls. Nine out of 10 respondents also believe
their internal auditors keep up to date with changes in the business and industry. Despite all the good news, there still
is work to be done. According to the survey, more than 70 percent of stakeholders want to see their internal auditors
focusing beyond assurance and (1) consult on business process improvements, (2) facilitate and monitor effective
risk management, and (3) alert management to emerging issues and challenging scenarios.

 New Risks Such as Brexit Are Reinforcing the Need to "Audit at the Speed of Risk"
For more than two years, I have been emphasizing the need for internal auditors to audit at the speed of risk. The first
half of 2016 has reaffirmed that we live in an era of extraordinary volatility. Consider that in the first six-months of the
year, the world has seen a collapse and partial recovery of oil prices, an epidemic of incredibly violent and tragic
terrorist attacks on virtually every continent, a political climate in America that is virtually unprecedented in terms of its
unpredictability, and the unforeseen vote by U.K. citizens to leave the European Union and the resulting plunge of the
Pound Sterling and Euro against the dollar. Each of these developments would have been unthinkable a year ago,
and would have not likely been on many risk assessments. As internal auditors, we must constantly reassess risks
and revise our audit plans accordingly.

 The Profession Is Increasingly at the Epicenter of Corporate Scandals

In 2015, culture-induced scandals were a regular feature. In 2016, the aftershocks of these scandals are continuing to
reverberate. In some cases, the role of internal audit (or lack thereof) is being cited as a contributing cause or
concern. As I noted in a recent blog, two investor groups urged rejection recently of a vote of confidence in VW's
management board. The message from one of the groups is that VW continues to have overlap in major shareholder
and controlling functions, has a pay structure excessively linked to sales, has no whistleblower program, and has an
inefficient internal audit function. Recent allegations of corporate misconduct such as those involving Mitsubishi
Motors, and breaking allegations involving an executive at Fox News in the U.S. promise to keep corporate scandals
in the headlines for the remainder of the year. All of this serves as yet another reminder to internal auditors to be
attuned to corporate culture and assess the role it can play as a root cause in corporate failures or scandals.

 Demands for New Skills Are Creating Talent Risks

The emergence of new and complex risks continues to challenge the profession's ability to address challenges facing
their organizations. Technology risks are the most obvious, but other risks are taxing the ability of internal auditors to
meet the rising expectations of key stakeholders. In a recent survey, only 19% of internal auditors considered
themselves experts at applying their organization's risk framework in audits. As a result, recent IIA surveys disclosed
the widespread use of third-party service providers to augment internal audit capabilities as a result of limited skill
sets or staffing. As new risks emerge, it is likely that the "war for talent" will intensify those risks.

There are a number of actions that internal auditors can take in response to the ongoing/emerging trends outlined
above. The most important strategy for success is for auditors to keep their eyes and ears open and respond as
quickly as possible when risks or opportunities materialize.