Fayol Flashcards
According to Fayol’s 2nd principle of management (Authority and Responsibility), it may be justified that people who do less actual work in an organisation may be paid more money. Why might this be so?
In gaining power, you become more and more responsible for things that go wrong. If power doesn’t scale with responsibility there is large potential for corruption to occur. As such it is reasonable that a person in a higher position in a company, and so likely on a higher rate of pay, is doing less actual work due to the fact they are paid to be a figurehead of blame, i.e. they are being paid to take responsibility rather than to provide physical labour.
What could be problems with people who work less being paid more?
Work tends to become less tangible the further up the line of command one gets, in the sense it is harder to accurately monetise the contribution of the individual. This makes the idea that responsibility should scale with power more difficult to achieve, and makes monetising the fruits of a person’s labour difficult. Also, as Fayol puts it “responsibility is feared as much as authority is sought after,” “fear of responsibility paralyses much initiative and destroys many good qualities.”
What does Fayol believe is often forgotten when considering the idea of discipline?
“Discipline is what leaders make it,” i.e. you can’t simply expect discipline, or simply act in a way that commands obedience, respect etc. You must ensure that contracts are desirable for all involved also if you expect discipline. If we consider Maslow’s hierarchy of needs, for example, we see that physiological needs must be met as a foundation in order to guide people towards fulfilling higher level needs. It is unlikely that an individual will begin looking to ideas such as creative fulfilment and prestige if they are currently in a situation in which they are without shelter or reasonable levels of health. As such, it makes sense that contracts are desirable and work towards fulfilling individual needs if one is to expect discipline.
What methods does Fayols suggest may be effective in subordinating individual interest to general interest? What exactly does this mean? Can you think of any ways in which the necessity of such action could be reduced?
- Definition: No one person’s objectives or goals should come before the interests of the organisation.
- Fayol’s methods:
- Firmness and good example from superiors.
- Agreements as fair as is possible
- Constant supervision
So essentially control and inspiring discipline.
-Alignment of a person’s interests with the interests of the organisation may reduce the necessity to internalise such action. This would be useful when considering the idea of constant supervision. For example, selective hiring that looks for people who seem to embody the interests of the organisation by default. If we can trust that individuals seem to by default want to serve the interests of the organisation first, then perhaps we can invest less resources into supervision.
How might asymmetric information complicate Fayol’s concept of a good method of payment?
Fayol doesn’t explicitly make reference to the idea that only the employee need feel it fair. He states it should exist around contextual factors, but at the end of the day these parameters are decided by the person in the management position. The manager is unlikely to perfectly understand the state of a wider perspective, and so becomes subjective.
Also, there is clear incentive for firms to pay labour as little as they can get away with. The manager is more likely to understand a worker’s MRP than the worker is themselves, so there is opportunity to underpay them without the worker necessarily being aware that this is the case. This would only conflict with Fayol’s other ideas if the worker believes they are being “extorted,” so there is an implied incentive to deceive subordinates regarding the true value of their labour.
However, the individual may actually have a better understanding of their MRP than the managers, more specifically their MPP, as they control their productivity. So long as there is lack of information regarding an individual’s productivity, the manager has the potential to over pay, with also conflicts with the concept of what Fayol believes to be a good method of pay.
Describe the 3 rate systems of pay, as well as any problems
Time Rates: e.g. £7.80 an hour. Tends towards negligence so requires constant supervision, but is the most common kind of work.
Job Rates: Set task to be completed for set amount of money. How much time this takes is irrelevant (though there will usually be a deadline), e.g. the website “Fiverr.” Requires less supervision, but is likely to prevent exceptional workers – “levelling the output of good workers down to that of mediocre ones.” i.e. mediocre workers will usually not take these tasks, and good workers would feel they could do more had they been paid to do so, so will do the bare minimum to satisfy the specifications of the job and receive the payment. (This could be amended by highly specific description of the job, but in term is likely to have to ask for money for the increased responsibility deterring many potential workers).
Piece Rates: Payment scales with the amount of work done, with no limit on how much is to be done, often used in workshops that mass-produce similar items. Potential to be inconsistent, and also strongly incentivises quantity over quality. Also, when the process of manufacturing improves, there is difficult in altering piece rates because wage rates tend to be sticky downwards. To reduce risk for important jobs where quality is essential, other methods have to be used or supplemented into this system.
How could minimum wage legislation reduce the effectiveness of certain kinds of bonus structures described by Fayol?
Minimum wage legislation reduces the extent to which bonuses can represent a person’s overall income package. As such, more is given by default rather than by performance reward. Same logic applies to profit sharing (because minimum wage means there is less profit to be shared*).
Bonus’ that vary with the price of the product manufactured, e.g. as was implemented for a while in the Welsh mining industry encouraged workers to slack off so that the price of their product rises from lack of supply. Minimum wage exaggerates the extent to which this is possible.
*the less profit due to minimum wage, the increased necessity that this profit is spent elsewhere rather than on reward if we assume that firms want to use profits to expand. Also, if the profit shared with the worker was proportional to the increase in profit they personally brought to the company beyond the minimum wage, this would likely be a very small amount (at least for large firms), we would have to give them a greater than proportionate share of the profit to provide further incentive, which is paying too much.
Note also the fact that in the west, most governments aim to make the minimum wage close to the minimum wage, reducing the impact that a bonus will have in the sense that any one person likely doesn’t need the bonus as much as they would had their wage been lower
Why might payment in kind be more useful than increasing wage from the perspective of the manager? Are there problems with this?
It makes sense for an employer to offer things that aren’t necessarily money to ensure that their employees have them. For example, if healthcare is £2000, giving them the money to afford it doesn’t ensure they will buy it. But if you pay them in healthcare in value of £2000, they are guaranteed to use it, and a healthy worker is more useful. Same for education, company cars, transport expenses, food, etc.
But these specific types of payment may not actually incentivise the individual and go against the idea of contracts that satisfy specific needs of the individual.
What issues may arise from a scalar chain of command?
Time consuming to let information pass all the way up and back down a scalar chain. “Gang planks” can prevent this, i.e. they ask their superiors if they can interact directly and if permitted can avoid this time lag. However, this could also be problematic. If the two subordinates interacting via a gang plank disagree, they know there will be time lags because this issue will have to return to passing up and down the scalar chain. As such, they may be more inclined to avoid agreements due to aversion to inconvenience and time lags if detrimental to their work. This may lead to suboptimal agreements, and potential for dual control if one subordinate is able to assert themselves over the other and the other wants to avoid inconvenience of deviation from the gang plank. Fayol believes dual control shouldn’t exist.
How is Fayol’s conception of order similar to Porter’s idea of positioning?
Fayol believes that the in an extension of the axiom “there is a place for all things and all things are in their place,” that true order results when the places in question for workers are maximally orientated to the main goal of the organisation. Of course there is the same issue here of being incredibly hard to ascertain ex ante, as is the case with Porter’s positions. Nonetheless this idea states that there is one perfect position that you may or may not have positioned yourself on, and that will play a large part in determining the success of a corporation.
