Business management plays an important role in the creation and running of an organisation. The principles of business management provide direction to the business owners and managers on how they ought to manage the business resources, set goals as well as oversee operations. By applying these principles, organisations can flourish in a competitive surrounding and achieve sustainable growth.
“Business management principles are often defined as core theories that assist an organisation in making informed decisions.”
These principles include a category of management concepts that act as a guideline to the manager and the entrepreneur. By implementing such principles, organisations ensure effectiveness in processes, and efficiency in achieving the laid down objectives and goals of an organisation.
Even experienced managers and entrepreneurs need to realise certain principles of managing a business if they want to create an effective and productive organisation. Here are some of the most fundamental principles:
This concept of division of work means decentralisation of work, recommending that people ought to be assigned specific jobs depending on their area of specialisation. This approach makes work more efficient as the employees will be matching the description of the job and thus, they gain mastery over the job as they continue practicing.
Another advantage of dividing work is that it shortens the time required for the completion of tasks and increases total organisational efficiency, by minimising mistakes. When employees are allowed to focus on their specialisation, companies develop competent and experienced staff that in the long run will help the business gain a competitive advantage in the market.
The authority and responsibility principle postulates that control of some organisational activity cannot exist without accountability for the results of that control. Managers should be endowed with the appropriate power to enable them to perform their duties properly, but this carries with it the responsibility for any outcomes that may follow. This equals both power and responsibility, no abuse of authority, motivation for reasonable conduct, and trust within the organisation.
Decentralised authority makes certain that decision-makers exercise prudence and make decisions based on the best interests of the company, hence making business entities become more ethical and efficient.
Discipline is the basis of work organisation and treatment of subordinates. It covers conformity to set policies, standards, laws and procedures in the organisation.
Discipline creates order to increase compliance and guarantee that employees’ conduct, and performance complies with organisational expectations. Organisation wide discipline strengthens employee satisfaction, minimises rivalry, and preserves a stress-free environment at the workplace. When managers are disciplining their subordinates fairly and publicly, they develop professionalism, respect, integrity and employees have confidence in their management.
The Unity of command principle requires that every worker should report to only one boss or have only one clear chain of authority. This helps to eliminate confusion as well as possible rivalry that may be caused by an employee receiving instructions from two or more managers.
One of the benefits of having clarity in the reporting is that it fosters efficient communication, fast decision-making and implementation tends to be very quick. There is an alignment of authority and communication to enhance responsibility and improve the response of employees to the available directives, thus achieving organisational order.
The idea of the unity of direction states that in a company all efforts should be oriented to the single goal or aim. Each department or team should contribute to the realisation that the overall organisational goals and objectives should be aligned to the general approach. This principle makes all the effort in the organisation to drive to the strategic goals, reducing inefficiencies and enhancing coherence.
Unity of direction therefore ensures organisations remain consistent and direction is easy to maintain, which is very important for employees to have a pool of long-term goals that can be achieved.
The subordination of individual interests principle emphasises the organisation goals and objectives at the expense of the employee’s self-goals and ambitions. It promotes employees to abandon personal objectives that will lead to personal gains at the expense of the company.
Because of this norm, it creates a work culture where every person within an organisation will work towards a common goal. Self-elimination of self-interest also cultivates commitment and devotion, because people comprehend that their effort contributes to the company’s goals and success.
Remuneration means reasonable and satisfactory compensation rendered to workers. Policy remunerations are very important in encouraging worker productivity, worker satisfaction and worker loyalty. If all employees are compensated fairly for their work, this will encourage them to remain in the company. Worthy remuneration packages would include, in addition to the salary, the benefits and bonuses which acknowledge the effort, and the input made by the employees for the organisation’s success. Providing competitive compensation also provides the opportunity to attract strong talent which improves the workforce of the organisation.
One of the critical factors yielding effectiveness is the balance between centralisation and decentralisation of the decision-making procedures. Centralisation resides in decision-making power at the organisational highest hierarchy to achieve uniformity and to manage the subordinates. There is decentralisation, where power is delegated to lower organisational levels so that managers who are closer to the situation make quick decisions.
The right balance depends on the organisational size, in addition to the organisational objectives and the level of process complexity. A well-organised balance allows flexibility and effective leadership to meet a company’s needs and thrive in various conditions.
The scalar chain gives a hierarchy of an organisation aiming at creating a certain line of control extending from the top management officials to the subordinates. This structure helps all the employees to be aware of their reporting line, which makes communication and coordination easy. The scalar chain contributes to improving the organisation’s stability and accountability since workers know their position in the company’s organisational structure.
By developing a clear system of chain of command, misunderstandings of different responsibilities and redirection of signals that may take place are avoided while work environment coherence is boosted.
Order means methods of arranging resources such as people, equipment, and materials in a proper way. Ensuring that every resource must be in its proper position yields the best value of benefits and avoids any sort of delay. Work and resourcing are also arranged within an ordered framework to help eliminate two workers having the same roles or tasks.
A cluttered work environment can only slow a company’s operations and provide a negative influence on everyone; on the other hand, proper organisation of the office leads to high efficiency and a pleasant working environment.
Equity teaches that employers must be fair and unbiased when handling employees. Workers should be respected by their managers and receive equal treatment which fosters a supportive work environment. Fairness in remuneration, acknowledgement and opportunity for career advancement contribute to increased employee morale and retention.
Through equity theory, organisations are enabled to correct attitudes by developing a positive culture where employees would feel motivated by perceived equitable outcomes.
This principle of stability of tenure puts much importance on the holding of employees to the organisation. Consequently, a high turnover rate implies workflow interruptions, employee recruitment, and training expenses. To support stability of tenure, companies must therefore improve employee development, provide promotions or training and nurture a positive workplace. When employees see a career ladder and a sense of job security, chances are they will remain loyal to the organisation and will contribute to long-term growth.
Promoting initiative enables the organisation’s employees to take responsibility in their line of duty, use their skills and intellect on how to assist the company. If employees are encouraged to take responsibility for their ideas, the company can harness their creativity. Empowered employees might find ways or develop new ideas to change or innovate existing processes and methodologies.
Promoting initiatives provides the organisation with more competitive edges, adds to the satisfaction of employees and above all guarantees constant evolution.
Esprit de corps principle encourages morale, unity, and community between workers. When managers develop team spirit, the corporate organisation structure becomes more effective enabling group members to work together. That way, high morale will encourage the employees to work harder and provide a healthy working environment that minimises conflicts.
Esprit de corps is basically a middle for employee commitment since employees feel they belong to a team that is working together towards a common goal. It is important in developing a good corporate culture that supports organisational development, employee performance and satisfaction.
In conclusion, understanding and the application of business management principles can greatly improve the functionality of an organisation. These principles from authority and responsibility to esprit de corps create a stable base which companies adapt to their functionality. Today, competition plays an important role in the environment which means that an organisation with proper orientation on business management with references to principles of innovation can reach sustainable success.
For relevant knowledge and hands-on experience on business management, enroll now in Business Management Courses at the British Academy of Training and Development.