How to Start a Business with Henri Fayol’s 5 Functions of Management

Alongside Frederick Winslow Taylor, Henri Fayol is widely acknowledged as the founder of modern management method. He was a French mining engineer, director, author and executive who developed a general theory of business administration. His popularity brought about Fayolism. Here are the 5 functions of management from his book Administration Industrielle et Générale (Industrial And General Administration) in 1916.

The Five Functions of Management

Henri Fayol proposes the creative problem-solving method in management. This is the five functions of management. Each function requires a new way of thinking in solving organizational problems. It also works as a step-by-step guide, as one function builds up to the next. The first two deals with assessing the situation and putting targets in place and the next two deals with proper implementation; the last is concerned with evaluating the efforts and auditing.

1. Planning

This is the most difficult of the five functions of management, and it sits at the top of the list. Planning looks forward to where the company is heading and guarantees its continuity. As such, it involves everyone within the organization and the available resources it has to work with. For it to be realistic, it should link to and coordinate with the different levels of the enterprise concerning timelines and implementation.

2. Organizing

The importance of this step is seen from the very root of the word ‘organization’. The power of a group of people is only as good as it is organized. One aspect of this requires the usual logistics — having sufficient capital, staff, and raw materials to keep the business running smoothly. The other half of it is all about building a good work structure, with a strategic division of functions and priorities. As the number of functions increase, a group structure expands; vertically in terms of needing a new type of leadership, and horizontally as more manpower is added.

3. Commanding

Executing the planning and organizing relies heavily on the quality of the commands. Clear work instructions enable employees to know exactly what is expected of them and set to work immediately. This is a trade secret in optimizing human resources. A successful manager is not unreasonable and demanding; he/she is full of integrity, communicates clearly and bases his/her decisions on regular audits. These kinds of managers are fully capable of motivating a team and encouraging employees to take initiative.

4. Coordinating

The nature of any organization is the co-dependence of each member to one another. Harmony is key to this essential ingredient. This is the culture of the workplace. Intentional influencing of positive employee behaviors is part of coordination efforts. Best practices require encouraging motivation, upholding discipline, communicating clearly, and modeling good leadership. This is the best way to meet group objectives.

5. Controlling

Control is the follow-through on all the managing efforts combined. It verifies whether or not everything is going according to plan, and detects the activities that are not yielding results, through monitoring the processes. In 1954, Peter Drucker set the trend for ‘management by objectives’ principles and until today businesses are run by these goal-setting mindset.

Google, Intel, and Anheuser-Busch InBev modified the old traditional standards of setting these goals; replacing SMART Goals (Specific, Measurable, Achievable, Realistic, and Time-bound) with FAST goals (Frequent, Ambitious, Specific, and Transparent). These FAST Goals are a more dynamic approach to the structured SMART Goals. To see how Henri Fayol’s 4-step process of control is still applicable to modern business, here’s how you could apply it using the FAST goals management method.

Source: sloanreview.mit.edu

4-Step Process of Control

Step 1: Establish performance standards based on organizational objectives.

Set ambitious performance targets. Under SMART goals, setting realistic, achievable targets that have to be met by the end of the year under any circumstance constricts the planning team to undersell their capabilities for fear of failure. In FAST goals, planning targets should be set to difficult but still possible goals, with the goals being checked and adjusted frequently using real-time data produced by actual work progress.

Step 2: Measure and report on actual performance

Keeping the specific in SMART goals, FAST goals also require abstract goals to be translated into concrete, measurable metrics and milestones. Every objective is broken down into steps on how to achieve it, with each step converted into a task with a progress tracker. Keeping the goals time-bound is a given at this point. This gives clarity on what is expected of each person in the team and identifies in real-time what goals work and what doesn’t.

Step 3: Compare results with performance and standards

Make the goals transparent to everyone, from individual to team performance trackers. It shows the overall impact of each member of the team, giving them a sense of community and meaning with their teammates. It also makes them accountable using peer pressure while also understanding the workload of each member to support each other. This also helps the team point out which tasks are not aligned with the strategy.

Step 4: Take corrective or preventive measures as needed

Discuss progress frequently. Constantly keep the goals and strategy at the top of mind of the team members. Base progress reviews, resource allocation, prioritization and feedback on the goals. It should be the key guide for each business decision made by the top manager to the team members. It keeps everyone aware of what matters most and makes for sound, constructive feedback.

In conclusion

The world of business is constantly changing. We are entering into the third industrial revolution — the digital revolution — yet these principles of management remain relevant for businessmen today. Today’s workforce wants meaningful work, creativity, and dynamic structures. Although we are moving away from the hierarchical work structure, preferring mobile work and cloud collaborations and flatter corporate ladders; times may be different from the electric industrial revolution that Fayol knew in the 1900s but it is still good — even crucial — to know what principles stay and what goes away.

The five functions of management are to plan, organize, command, coordinate, and control a certain group of people. It requires an affinity within a team and highlights that ultimately, a company is not a one-man team but a community of passionate individuals moving towards a common goal.