In organizing an enterprise, it is necessary to adhere to certain basic Organization Principles, which should serve as guidelines for action. These are as follows:
1. The principle of unity of objective: An enterprise must have a clearly defined objective (or objectives). It must be realized that an enterprise is a means to an end, and not an end in itself.
As a corollary, each unit in the enterprise must have an objective which should logically be related to the overall objective. (Its contribution to the common goal.)
An organization structure is effective if it facilitates the contribution made by all individuals in the enterprise to the attainment of the objectives of an enterprise. All should contribute harmoniously to the achievement of the common goal of the business and also to the good of the individual members of the business. The common goal includes primary objectives such as producing, selling or profit-making, and secondary objectives like job satisfaction, payment of wages, having good communication, joint consultation, etc.[ Organization Principles ] 2. The principle of co-ordination: People working towards a common objective must co-ordinate their efforts. In a typical organization, a manager will have:
(a) a boss
(b) subordinates, often 4 to 6 in number; and
(c) colleagues, often of his own status.
The structure within a department is often called a chain of command, e.g., A is the boss, B is his subordinate, C is B’s subordinate, D is C’s subordinate and so on. Each superior (or boss) in the chain of command is responsible for co-ordinating the work of those under him and his own efforts. The work of others on his level are in turn coordinated by their common superior.One of the essentials of co-ordination is good communication flow, vertically and laterally, e.g., from superior to subordinate and to people of the same level throughout the enterprise. Co-ordination committees are usually formed for this purpose (e.g., General Management Committee, Budget Coordination Committee, Planning Committee, etc.).[ Organization Principles ] 3. The principle of efficiency: The organization should be planned so that the objective can be attained with the lowest possible cost, which may be either money cost or human costs or both. 4. The principle of unity of direction: There should be one head (or chief person) and one plan of action for each group of activities having a common objective and everyone must work in accordance with the plan towards the objective in one common direction. 5. The principle of unity of command: Each person should receive orders from only one superior and be accountable only to him, i.e., he should have only one boss. If a person receives orders from more than one boss, the orders may conflict, thereby confusing him and often leading to conflicts arising from divided loyalties. 6. The principle of specialization: As far as possible, the work of each person should be confined to a single function. In other words, he should not be a “jack of all trades.” Since this is not always possible to achieve, it is generally held that related functions should be grouped together under a common superior.[ Organization Principles ] 7. Scalar principle: The organization must have a supreme authority and a clear line of authority should run from that person (or group) down through the hierarchy, e.g., from the Chairman—the Managing Director—Plant Manager— Production Manager— Foreman-rank and file of employees. The clearer the line of authority (from the ultimate authority for management to every subordinate position) the more effective will be the responsible decision-making and organization communication. This is usually called the scalar principle because the hierarchy is like a scale. The resulting hierarchy is known as the “Chain of Command.”[ Organization Principles ] 8. A short chain of command: If the chain of command is short, it will enable better communication at various levels within the enterprise and cause fewer delays and bring the top decision-maker to grassroots levels (i.e., the operating personnel). 9. Authority and responsibility: Should commensurate with each other, i.e., a man must have sufficient authority to fulfill his responsibilities. Conversely, if a man has the authority, he should be willing to take the responsibility for the results.[ Organization Principles ] 10. The principle of delegation: Decision should be made at the lowest competent level. For this purpose, authority (or powers for decision-making) should be delegated as far down the line as possible. 11. The principle of balance: There are various parts of an enterprise (e.g., Sales, Production, Accounts, Personnel, etc.) which functions in close coordination to meet the objectives of the enterprise. A continuous survey should be made to ensure that there is a reasonable balance, the size of the various parts should be in balance and none of the functions should be
given undue emphasis at the expense of others. A continuous survey should be made to ensure that there is a reasonable balance in the size of the various departments, between standardization of procedures and flexibility, and between centralization and decentralization. Imbalances between departments occur as a result of new technology, new products,
new marketing plans, etc. There should also be a balance between the principle of the span of control and the principle of short chain of command. The application of principles and techniques must be balanced in the light of overall effectiveness of the structure of the enterprise in meeting its objectives.[ Organization Principles ] 12. The principle of change: Change is one unchanging characteristic of an organization. In other words, an organization should be flexible and capable of adjusting to change, it cannot be rigid. It has to be flexible to take care of changing circumstances. 13. The federal principle of an organization: The enterprise after it has reached a certain position may well be split up into a series of separate semi-autonomous enterprises, to each of which responsibility is delegated.